Feedback Trading and Predictability of Stock Returns in Germany, 1880-1913
AbstractI use a time-varying parameter model in order to study the predictability of monthly real stock returns in Germany over the period 1880–1913. I find that the extent to which returns were predictable underwent significant changes over time. Specifically, predictability of returns, as measured by their first-order autocorrelation coefficient, was positive most of the time. It tended to be significant during extended periods of stock market decline, but not during periods of stock market increase. I argue that this time-pattern of predictability of returns is consistent with feedback effects of futures trading on the spot market.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1213.
Length: 26 pages
Date of creation: May 2004
Date of revision:
Stock market; Return Predictability; Germany;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-02 (All new papers)
- NEP-EEC-2004-06-02 (European Economics)
- NEP-FIN-2004-06-02 (Finance)
- NEP-FMK-2004-06-02 (Financial Markets)
- NEP-HIS-2004-06-02 (Business, Economic & Financial History)
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