Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
Home

About this journal
   Aims and scope

   Editorial board

Submit your article

Archive

Search

Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Long-Horizon Stock Return Predictability Test with A Nonlinear Nonparametric Bootstrap Method

Vol.19, No.1, March , 17–48



  •   (Department of Business Administration, Myongji University)

PDF
Abstract  

A nonparametric bootstrap procedure with an LSTAR modeling of the valuation ratio is applied to the continuously compounded real stock return and the log of the price-dividend process. The empirical distribution of the test statistics shows that the evidence for a stock return predictability weakens when we take care of nonlinearity dynamics in the regressor. We split the sample into two regimes and implement the long-horizon predictability tests. Results show that the stock return is predictable in the stationary regime, while the test statistic under the null of unpredictability is insignificant in the non-stationary regime.


Keywords
   Structural Change, Price-Dividend Ratio, Long-Horizon Regression Model, Bootstrapping, LSTAR Model (Logistic Smooth Transition Autoregressive Model)

JEL classification codes
   C22, G14
Links

KCI list
Korean ES
JETEM at SCOPUS

Powered by MathJax