Predictive regressions for macroeconomic data
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Publication:2453692
Abstract: Researchers have constantly asked whether stock returns can be predicted by some macroeconomic data. However, it is known that macroeconomic data may exhibit nonstationarity and/or heavy tails, which complicates existing testing procedures for predictability. In this paper we propose novel empirical likelihood methods based on some weighted score equations to test whether the monthly CRSP value-weighted index can be predicted by the log dividend-price ratio or the log earnings-price ratio. The new methods work well both theoretically and empirically regardless of the predicting variables being stationary or nonstationary or having an infinite variance.
Recommendations
- Nonparametric predictive regression
- A new test of asset return predictability with an unstable predictor
- A reexamination of stock return predictability
- A nonparametric approach to test for predictability
- A unified test for predictability of asset returns regardless of properties of predicting variables
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Cited in
(20)- A perspective on recent methods on testing predictability of asset returns
- A unified test for predictability of asset returns regardless of properties of predicting variables
- Statistical inferences in a partially linear model with autoregressive errors
- A new test of asset return predictability with an unstable predictor
- Nonparametric predictive regression
- A new robust inference for predictive quantile regression
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