We evaluate the empirical validity of popular asset-pricing models in explicit consideration of statistical power, by employing the adaptive significance level and equal-probability test. Past studies often use samples from a large cross-section of portfolios over a long time period, conducting...

This paper critically evaluates the significant weather effect on stock return reported in two seminal studies of investors' mood on stock market. It is found that their research design of maximizing statistical power by pooling as many data points as possible is statistically flawed, with a...

This paper evaluates the predictive ability of dividend yield for stock return using a new bootstrap test for the significance of predictive coefficients. The predictive model is expressed as a restricted vector autoregressive model, and the bootstrap is conducted with resampling based on...

This paper critically reviews the practice of significance testing in modern finance research. Employing a survey of recently published articles in four top-tier finance journals, we find that the conventional significance levels are exclusively used with little consideration of the key factors...

Precious metals (gold, silver, and platinum) have become an important part of investment portfolios for individuals as well as for institutions. A key question is whether investors should actively trade these metals to time the market or whether they should take a buy-and-hold strategy. This...

This paper proposes the use of the bootstrap when the system Wald test is employed to test for linear restrictions in a stationary vector autoregressive (VAR) model. The bootstrap test is conducted using the generalized least square estimator for VAR parameters, which takes account of...

This paper analyzes the degree of return predictability (or weak-form informational efficiency) of Dow Jones Islamic and conventional size and sector-indices using the data from 1996 to 2013. Employing the automatic portmanteau and variance ratio tests for the martingale difference hypothesis of...

We investigate whether stock returns of international markets are predictable from a range of fundamentals including key financial ratios (dividend-price ratio, dividend-yield, earnings-price ratio, dividend-payout ratio), technical indicators (price pressure, change in volume), and short-term...

Market efficiency is an important feature of successful financial markets. The aim of this paper is to analyze the available evidence on the efficient market hypothesis (EMH). Meta-regression analysis is applied to 1,560 estimates of the Variance Ratio test of the efficiency of Asian and...

Serious concerns have been raised that false positive findings are widespread in empirical research in finance. This is largely because researchers almost exclusively adopt the "p-value less than 0.05" criterion for statistical significance; and they are often not fully aware of large-sample...