IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Nonparametric Predictive Regression

  • Ioannis Kasparis
  • Elena Andreou
  • Peter C. B. Phillips

A unifying framework for inference is developed in predictive regressions where the predictor has unknown integration properties and may be stationary or nonstationary. Two easily implemented nonparametric F-tests are proposed. The test statistics are related to those of Kasparis and Phillips (2012) and are obtained by kernel regression. The limit distribution of these predictive tests holds for a wide range of predictors including stationary as well as non-stationary fractional and near unit root processes. In this sense the proposed tests provide a unifying framework for predictive inference, allowing for possibly nonlinear relationships of unknown form, and offering robustness to integration order and functional form. Under the null of no predictability the limit distributions of the tests involve functionals of independent ÷² variates. The tests are consistent and divergence rates are faster when the predictor is stationary. Asymptotic theory and simulations show that the proposed tests are more powerful than existing parametric predictability tests when deviations from unity are large or the predictive regression is nonlinear. Some empirical illustrations to monthly SP500 stock returns data are provided.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/14-12.pdf
Download Restriction: no

Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 14-2012.

as
in new window

Length: 49 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:ucy:cypeua:14-2012
Contact details of provider: Web page: http://www.econ.ucy.ac.cy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Graham Elliott, 1998. "On the Robustness of Cointegration Methods when Regressors Almost Have Unit Roots," Econometrica, Econometric Society, vol. 66(1), pages 149-158, January.
  2. Michael Jansson & Marcelo J. Moreira, 2006. "Optimal Inference in Regression Models with Nearly Integrated Regressors," Econometrica, Econometric Society, vol. 74(3), pages 681-714, 05.
  3. Peter M. Robinson & Javier Hualde, 2002. "Cointegration in Fractional Systems with Unknown Integration Orders," Faculty Working Papers 07/02, School of Economics and Business Administration, University of Navarra.
  4. Ioannis Kasparis & Peter C.B. Phillips & Tassos Magdalinos, 2012. "Non-linearity Induced Weak Instrumentation," Cowles Foundation Discussion Papers 1872, Cowles Foundation for Research in Economics, Yale University.
  5. Phillips, P C B, 1991. "Optimal Inference in Cointegrated Systems," Econometrica, Econometric Society, vol. 59(2), pages 283-306, March.
  6. Tim Bollerslev & Hao Zhou, 2007. "Expected Stock Returns and Variance Risk Premia," CREATES Research Papers 2007-17, School of Economics and Management, University of Aarhus.
  7. Peter C.B.Phillips & Ioannis Kasparis, 2009. "Dynamic Misspecification in Nonparametric Cointegrating Regression," Working Papers CoFie-01-2009, Sim Kee Boon Institute for Financial Economics.
  8. Joon Y. Park & Peter C.B. Phillips, 1998. "Nonlinear Regressions with Integrated Time Series," Cowles Foundation Discussion Papers 1190, Cowles Foundation for Research in Economics, Yale University.
  9. Park, Joon Y. & Phillips, Peter C.B., 1999. "Asymptotics For Nonlinear Transformations Of Integrated Time Series," Econometric Theory, Cambridge University Press, vol. 15(03), pages 269-298, June.
  10. Eric Ghysels & Pedro Santa-Clara & Rossen Valkanov, 2004. "There is a Risk-Return Tradeoff After All," NBER Working Papers 10913, National Bureau of Economic Research, Inc.
  11. John Y. Campbell & Motohiro Yogo, 2003. "Efficient Tests of Stock Return Predictability," NBER Working Papers 10026, National Bureau of Economic Research, Inc.
  12. Phillips, Peter C.B., 2007. "Unit root log periodogram regression," Journal of Econometrics, Elsevier, vol. 138(1), pages 104-124, May.
  13. Qiying Wang & Peter C.B. Phillips, 2006. "Asymptotic Theory for Local Time Density Estimation and Nonparametric Cointegrating Regression," Cowles Foundation Discussion Papers 1594, Cowles Foundation for Research in Economics, Yale University.
  14. Kasparis, Ioannis, 2008. "Detection Of Functional Form Misspecification In Cointegrating Relations," Econometric Theory, Cambridge University Press, vol. 24(05), pages 1373-1403, October.
  15. Qi Li & Jeffrey Scott Racine, 2006. "Nonparametric Econometrics: Theory and Practice," Economics Books, Princeton University Press, edition 1, volume 1, number 8355.
  16. de Jong, R.M. & Bierens, H.J., 1994. "On the Limit Behavior of a Chi-Square Type Test if the Number of Conditional Moments Tested Approaches Infinity," Econometric Theory, Cambridge University Press, vol. 10(01), pages 70-90, March.
  17. Berkes, Istv n & Horv th, Lajos, 2006. "Convergence Of Integral Functionals Of Stochastic Processes," Econometric Theory, Cambridge University Press, vol. 22(02), pages 304-322, April.
  18. Vanessa Berenguer Rico & Jesus Gonzalo, 2011. "Summability of stochastic processes: a generalization of integration and co-integration valid for non-linear processes," Economics Working Papers we1115, Universidad Carlos III, Departamento de Economía.
  19. Kasparis, Ioannis, 2010. "The Bierens test for certain nonstationary models," Journal of Econometrics, Elsevier, vol. 158(2), pages 221-230, October.
  20. Peter M. Robinson & Javier Hualde, 2003. "Cointegration in fractional systems with unknown integration orders," LSE Research Online Documents on Economics 2223, London School of Economics and Political Science, LSE Library.
  21. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
  22. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 99-125, January.
  23. Hualde, J. & Robinson, P.M., 2010. "Semiparametric inference in multivariate fractionally cointegrated systems," Journal of Econometrics, Elsevier, vol. 157(2), pages 492-511, August.
  24. Marmer, Vadim, 2009. "Nonlinearity, Nonstationarity, and Spurious Forecasts," Microeconomics.ca working papers vadim_marmer-2009-60, Vancouver School of Economics, revised 03 Nov 2009.
  25. Peter C.B. Phillips, 2012. "On Confidence Intervals for Autoregressive Roots and Predictive Regression," Cowles Foundation Discussion Papers 1879, Cowles Foundation for Research in Economics, Yale University.
  26. Peter C.B.Phillips & Tassos Magdalinos, 2009. "Econometric Inference in the Vicinity of Unity," Working Papers CoFie-06-2009, Sim Kee Boon Institute for Financial Economics.
  27. Francesc Marmol & Carlos Velasco, 2004. "Consistent Testing of Cointegrating Relationships," Econometrica, Econometric Society, vol. 72(6), pages 1809-1844, November.
  28. Granger, Clive W J, 1995. "Modelling Nonlinear Relationships between Extended-Memory Variables," Econometrica, Econometric Society, vol. 63(2), pages 265-79, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ucy:cypeua:14-2012. 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: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.