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Small‐Sample Tests for Stock Return Predictability with Possibly Non‐Stationary Regressors and GARCH‐Type Effects

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  • Sermin Gungor
  • Richard Luger

Abstract

We develop a simulation-based procedure to test for stock return predictability with multiple regressors. The process governing the regressors is left completely free and the test procedure remains valid in small samples even in the presence of non-normalities and GARCH-type effects in the stock returns.

Suggested Citation

  • Sermin Gungor & Richard Luger, 2017. "Small‐Sample Tests for Stock Return Predictability with Possibly Non‐Stationary Regressors and GARCH‐Type Effects," Staff Working Papers 17-10, Bank of Canada.
    • Handle: RePEc:bca:bocawp:17-10
    DOI: 10.34989/swp-2017-10
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    References listed on IDEAS

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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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