Pitfalls in market timing test
AbstractHenriksson and Merton's market timing test suffers nontrivial size distortion when the observations are serially dependent sequences. Potential danger of finding spurious timing ability can be avoided by implementing a Markov regression that includes the lagged dependent variables as additional explanatory variables.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 103 (2009)
Issue (Month): 3 (June)
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Web page: http://www.elsevier.com/locate/ecolet
Market timing test Markov regression Spurious regression;
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