Testing the Predictability of Stock Returns
Previous literature indicates that stock returns are predictable by several strongly autocorrelated forecasting variables, especially at longer horizons. It is suggested that this finding is spurious and follows from a neglected near unit root problem. Instead of the commonly used t test we propose a test that can be considered as a general test of whether the return can be predicted by any highly presistent variable. Using this test no predictablility is found for US stock return data from the period 1928-1996. Simulation experiments show that the standard t test clearly overrejects while our proposed test controls size much better.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +358 9 191 8897
Fax: +358 9 191 8877
Web page: http://www.helsinki.fi/politiikkajatalous/Email:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fth:helsec:488. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.