Kostakis, Alexandros 
ORCID: 0000-0002-2358-6484, Magdalinos, Tassos and Stamatogiannis, Michalis P ORCID: 0000-0002-7283-7550
(2015)
Robust Econometric Inference for Stock Return Predictability.
Review of Financial Studies, 28 (5).
pp. 1506-1553.
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Abstract
This study examines stock return predictability via lagged financial variables with unknown stochastic properties. We propose a novel testing procedure that (1) robustifies inference to regressors' degree of persistence, (2) accommodates testing the joint predictive ability of financial variables in multiple regression, (3) is easy to implement as it is based on a linear estimation procedure, and (4) can be used for long-horizon predictability tests. We provide some evidence in favor of short-horizon predictability during the 1927-2012 period. Nevertheless, this evidence almost entirely disappears in the post–1952 period. Moreover, predictability becomes weaker, not stronger, as the predictive horizon increases.
| Item Type: | Article |
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| Uncontrolled Keywords: | Stock returns, Predictability, Persistent regressors, Robust inference |
| Depositing User: | Symplectic Admin |
| Date Deposited: | 03 Feb 2016 09:24 |
| Last Modified: | 19 Jan 2023 07:38 |
| DOI: | 10.1093/rfs/hhu139 |
| Related URLs: | |
| URI: | https://livrepository.liverpool.ac.uk/id/eprint/2048739 |
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