Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
Home About    Aims and Scope    Editorial Board Submit Archive Search Announcement
Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Test of Return Predictability: A New Two-Step Procedure

Vol.20, No.4, December , 50–73



  •   (Department of Economics, Konkuk University)

PDF
Abstract  

Predictive regressions are subject to finite sample bias. We propose a new twostep procedure to make correct inference for predictive regressions. Simulation results show that our procedure performs better than the existing two-step procedure in eliminating the bias and size distortion of the conventional $t$-test. We apply this procedure and find that dividend yield has lost predictive power for return since the early 1990s.


Keywords
   Predictive Regression, Bias Correction, Two-Step Estimation, Structural

JEL classification codes
   G10
Links

KCI
KES
SCOPUS
MathJax