Adaptative predictability of stock market returns

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dc.contributor.author Casas Villalba, Maria Isabel
dc.contributor.author Mao, Xiuping
dc.contributor.author Lopes Moreira Da Veiga, María Helena
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Estadística
dc.date.accessioned 2020-12-18T16:30:59Z
dc.date.available 2020-12-18T16:30:59Z
dc.date.issued 2020-12-18
dc.identifier.issn 2387-0303
dc.identifier.uri http://hdl.handle.net/10016/31648
dc.description.abstract We revisit the stock market return predictability using the variance risk premium and conditional variance as predictors of classical predictive regressions and time-varying coefficient predictive regressions. Also, we propose three new models to forecast the conditional variance and estimate the variance risk premium. Our empirical results show, first, that the flexibility provided by time-varying coefficient regressions often improve the ability of the variance risk premium, the conditional variance, and other control variables to predict stock market returns. Second, the conditional variance and variance risk premium obtained from varying coefficient models perform consistently well at predicting stock market returns. Finally, the time-varying coefficient predictive regressions show that the variance risk premium is a predictor of stock market excess returns before the global financial crisis of 2007, but its predictability decreases in the post global financial crisis period at the 3-month horizon. At the 12-month horizon, both the variance risk premium and conditional variance are predictors of stock excess returns during most of 2000-2015.
dc.language.iso eng
dc.relation.ispartofseries Working paper. Statistics and Econometrics
dc.relation.ispartofseries 20-11
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Nonparametric Methods
dc.subject.other Predictability
dc.subject.other Realized Variance
dc.subject.other Time-Varying Coefficient Har-Type Models
dc.subject.other Time-Varying Coefficient Predictive Regressions
dc.subject.other Variance Risk Premium
dc.title Adaptative predictability of stock market returns
dc.type workingPaper
dc.subject.jel C22
dc.subject.jel C51
dc.subject.jel C52
dc.subject.jel C53
dc.subject.jel G1
dc.identifier.uxxi DT/0000001859
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