Gonzalo, Jesus and Pitarakis, JeanYves (2010): Regime Specific Predictability in Predictive Regressions.

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Abstract
Predictive regressions are linear specifications linking a noisy variable such as stock returns to past values of a more persistent regressor with the aim of assessing the presence of predictability. Key complications that arise are the potential presence of endogeneity and the poor adequacy of asymptotic approximations. In this paper we develop tests for uncovering the presence of predictability in such models when the strength or direction of predictability may alternate across different economically meaningful episodes. An empirical application reconsiders the Dividend Yield based return predictability and documents a strong predictability that is countercyclical, occurring solely during bad economic times
Item Type:  MPRA Paper 

Original Title:  Regime Specific Predictability in Predictive Regressions 
Language:  English 
Keywords:  Endogeneity, Persistence, Return Predictability, Threshold Models 
Subjects:  C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C50  General C  Mathematical and Quantitative Methods > C2  Single Equation Models; Single Variables > C22  TimeSeries Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models 
Item ID:  29190 
Depositing User:  J Pitarakis 
Date Deposited:  06. Mar 2011 21:21 
Last Modified:  18. Feb 2013 19:59 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/29190 