This paper develops two-stage model averaging (2SMA), an extension of model averaging. 2SMA allows researchers to incorporate economic theory or prior economic information into their forecasts. By using prior economic information, 2SMA leverages models known to perform well while diversifying...

This study provides the first examination of the Canadian implied volatility indexes for forecasting future volatility. Introduced by Montreal exchange in 2010, the model-free implied volatility index for the Canadian stock market, the VIXC, outperforms the previously used model-based index, the...

This article comprehensively reviews the predictability of six equity factors. These factors are the market excess return, size, value, momentum, low beta and quality. I find predictability for the low beta factor and moderate predictability for the size factor. The results for other factors are...

This paper investigates the role of volatility risk on stock return predictability specified on two global financial crises: the dot-com bubble and recent financial crisis. Using a broad sample of stock options traded at the American Stock Exchange and the Chicago Board Options Exchange (CBOE)...

Individuals and asset managers trade aggressively, resulting in high volume in asset markets, even when such trading results in high risk and low net returns. Asset prices display patterns of predictability that are difficult to reconcile with rational expectations – based theories of price...

This paper is an attempt to predict stock returns using classical (AR) and intelligent (ANN) techniques. AR and ANN techniques are also used to test the efficient market hypotheses using long time-series of daily data of BSE Sensex for the period of January 1997 to September 2005. An attempt has...

The paper shows that controlling for the aggregate volatility risk factor eliminates the puzzling negative relation between variability of trading activity and future abnormal returns. I also find that variability of other measures of liquidity and liquidity risk is largely unrelated to expected...

This paper proposes a Near Explosive Random-Coefficient autoregressive model for asset pricing which accommodates both the fundamental asset value and the recurrent presence of autonomous deviations or bubbles. Such a process can be stationary with or without fat tails, unit-root nonstationary...

Research on the predictability of short-horizon returns in developed markets has shown that daily, weekly and monthly returns are predictable from past returns, and that the predictable variation is a small part of variance of returns. In order to provide evidence from an emerging stock market,...

Firms whose quarterly earning announcements closely meet the most recent analyst consensus forecast enjoy higher long-lasting future returns. These firms tend to be larger and are followed by more analysts, whose forecasts have a smaller dispersion. While the proportion of past quarters when...