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The optimal use of return predictability : an empirical study
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Abhyankar, Abhay, Basu, Devraj and Stremme, Alexander (2012) The optimal use of return predictability : an empirical study. Journal of Financial and Quantitative Analysis, Volume 47 (Number 05). pp. 973-1001. doi:10.1017/S0022109012000415 ISSN 0022-1090.
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WRAP_Stremme_S0022109012000415a.pdf - Published Version Download (591Kb) | Preview |
Official URL: http://dx.doi.org/10.1017/S0022109012000415
Abstract
In this paper we study the economic value and statistical significance of asset return predictability, based on a wide range of commonly used predictive variables. We assess the performance of dynamic, unconditionally efficient strategies, first studied by Hansen and Richard (1987) and Ferson and Siegel (2001), using a test that has both an intuitive economic interpretation and known statistical properties. We find that using the lagged term spread, credit spread, and inflation significantly improves the risk-return trade-off. Our strategies consistently outperform efficient buy-and-hold strategies, both in and out of sample, and they also incur lower transactions costs than traditional conditionally efficient strategies.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
Library of Congress Subject Headings (LCSH): | Economics -- Mathematical models , Assets (Accounting), Business forecasting | ||||
Journal or Publication Title: | Journal of Financial and Quantitative Analysis | ||||
Publisher: | Cambridge University Press | ||||
ISSN: | 0022-1090 | ||||
Official Date: | October 2012 | ||||
Dates: |
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Volume: | Volume 47 | ||||
Number: | Number 05 | ||||
Page Range: | pp. 973-1001 | ||||
DOI: | 10.1017/S0022109012000415 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access | ||||
Date of first compliant deposit: | 25 December 2015 | ||||
Date of first compliant Open Access: | 25 December 2015 |
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