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Real-time forecasting and political stock market anomalies: evidence for the U.S

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  • Bohl, Martin T.
  • Döpke, Jörg
  • Pierdzioch, Christian

Abstract

Using monthly data for the period 1953-2003, we apply a real-time modeling approach to investigate the implications of U.S. political stock market anomalies for forecasting excess stock returns. Our empirical findings show that political variables, selected on the basis of widely used model selection criteria, are often included in real-time forecasting models. However, they do not contribute to systematically improving the performance of simple trading rules. For this reason, political stock market anomalies are not necessarily an indication of market inefficiency. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2006,22.

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Date of creation: 2006
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Handle: RePEc:zbw:bubdp1:4723

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Keywords: Political stock market anomalies; predictability of stock returns; efficient markets hypothesis; real-time forecasting;

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  1. Koetter, M. & Bos, J.W.B. & Heid, F. & Kolari, J.W. & Kool, C.J.M. & Porath, D., 2007. "Accounting for distress in bank mergers," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3200-3217, October.
  2. John Y. Campbell & Jens Hilscher & Jan Szilagyi, 2008. "In Search of Distress Risk," Journal of Finance, American Finance Association, vol. 63(6), pages 2899-2939, December.
  3. Falko Fecht & Kevin X. D. Huang & Antoine Martin, 2004. "Financial intermediaries, markets, and growth," Working Papers 04-24, Federal Reserve Bank of Philadelphia.
  4. Slacalek, Jirka & Fritsche, Ulrich & Dovern, Jonas & Döpke, Jörg, 2005. "European inflation expectations dynamics," Discussion Paper Series 1: Economic Studies 2005,37, Deutsche Bundesbank, Research Centre.
  5. von Kalckreuth, Ulf, 2005. "A "wreckers theory" of financial distress," Discussion Paper Series 1: Economic Studies 2005,40, Deutsche Bundesbank, Research Centre.
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