The University of Southampton
University of Southampton Institutional Repository

Regime specific predictability in predictive regressions

Regime specific predictability in predictive regressions
Regime specific predictability in predictive regressions
Predictive regressions are linear specifications linking a noisy variable such as stock returns to past values of a very persistent regressor with the aim of assessing the presence of predictability. Key complications that arise are the potential presence of endogeneity and the poor adequacy of asymptotic approximations. In this paper we develop tests for uncovering the presence of predictability in such models when the strength or direction of predictability may alternate across different economically meaningful episodes. An empirical application reconsiders the Dividend Yield based return predictability and documents a strong predictability that is countercyclical, occurring solely during bad economic times.
0735-0015
229-241
Pitarakis, Jean-Yves
ee5519ae-9c0f-4d79-8a3a-c25db105bd51
Gonzalo, Jesus
57637a0a-f7da-417f-9d2e-3a33a7082504
Pitarakis, Jean-Yves
ee5519ae-9c0f-4d79-8a3a-c25db105bd51
Gonzalo, Jesus
57637a0a-f7da-417f-9d2e-3a33a7082504

Pitarakis, Jean-Yves and Gonzalo, Jesus (2012) Regime specific predictability in predictive regressions. Journal of Business and Economic Statistics, 30 (2), 229-241. (doi:10.1080/07350015.2011.652053).

Record type: Article

Abstract

Predictive regressions are linear specifications linking a noisy variable such as stock returns to past values of a very persistent regressor with the aim of assessing the presence of predictability. Key complications that arise are the potential presence of endogeneity and the poor adequacy of asymptotic approximations. In this paper we develop tests for uncovering the presence of predictability in such models when the strength or direction of predictability may alternate across different economically meaningful episodes. An empirical application reconsiders the Dividend Yield based return predictability and documents a strong predictability that is countercyclical, occurring solely during bad economic times.

This record has no associated files available for download.

More information

Published date: April 2012
Organisations: Economics

Identifiers

Local EPrints ID: 300508
URI: http://eprints.soton.ac.uk/id/eprint/300508
ISSN: 0735-0015
PURE UUID: 686139c2-cdc2-4f4d-98c4-d584bdd0c8e7
ORCID for Jean-Yves Pitarakis: ORCID iD orcid.org/0000-0002-6305-7421

Catalogue record

Date deposited: 22 Feb 2012 12:24
Last modified: 15 Mar 2024 03:16

Export record

Altmetrics

Contributors

Author: Jesus Gonzalo

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×