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Are US stock index returns predictable? Evidence from automatic autocorrelation-based tests

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  • Kian-Ping Lim
  • Weiwei Luo
  • Jae H. Kim

Abstract

This article re-examines the evidence of return predictability for three major US stock indices using two recently developed data-driven tests, namely the automatic portmanteau Box--Pierce test and the wild bootstrapped automatic variance ratio test. In tracking the time variation of return predictability via rolling estimation window, we find that those periods with significant return autocorrelations can largely be associated with major exogenous events. Theoretically, the documented time varying nature of predictable patterns is consistent with the adaptive markets hypothesis.

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File URL: http://hdl.handle.net/10.1080/00036846.2011.613782
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 45 (2013)
Issue (Month): 8 (March)
Pages: 953-962

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Handle: RePEc:taf:applec:45:y:2013:i:8:p:953-962

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Cited by:
  1. Urquhart, Andrew & Hudson, Robert, 2013. "Efficient or adaptive markets? Evidence from major stock markets using very long run historic data," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 130-142.

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