Market timing and return prediction under model instability

Journal of Empirical Finance

Volumn 9, Issue 5, 2002, Pages 495-510

  Pesaran, M Hashem ^a   Timmermann, Allan ^b  

^a TRINITY COLLEGE   (United Kingdom)

^b UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

Market timing information; Predictability of US stock returns; Structural breaks

Indexed keywords

EID: 0036888093     PISSN: 09275398     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0927-5398(02)00007-5     Document Type: Article

References (28)

1. Bai, J., Perron, P., 1998. Estimating and testing linear models with multiple structural changes. Econometrica 66, 47-78.
2. Bai, J., Perron, P., 2001. Computation and analysis of multiple structural change models. Journal of Applied Econometrics (in press).
3. Bossaerts, P., Hillion, P., 1999. Implementing statistical criteria to select return forecasting models: what do we learn? Review of Financial Studies 12, 405-428.
4. Brandt, M.W., 1999. Estimating portfolio and consumption choice: a conditional Euler equations approach. Journal of Finance 54, 1609-1646.
5. Breen, W., Glosten, L.R., Jagannathan, R., 1989. The economic significance of predictable variations in stock index returns. Journal of Finance 44, 1177-1189.
6. Brennan, M., Schwarz, E., Lagnado, R., 1997. Strategic asset allocation. Journal of Economic Dynamics & Control 21, 1377-1403.
7. Brown, R.L., Durbin, J., Evans, J.M., 1975. Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society. Series B 37, 149-192.
8. Campbell, J.Y., 1987. Stock returns and the term structure. Journal of Financial Economics 18, 373-399.
9. Cooley, T.F., Prescott, E.C., 1976. Efficient estimation in the presence of stochastic parameter variation. Econometrica 44, 167-184.
10. Cooper, M., Gulen, H., 1999. Endogenizing Investor Uncertainty in Out-of-Sample Forecasts of Stock Returns. Manuscript, Purdue University.
11. Fama, E.F., French, K.R., 1988. Dividend yields and expected stock returns. Journal of Financial Economics 22, 3-25.
12. Fama, E.F., French, K.R., 1989. Business conditions and expected returns on stocks and bonds. Journal of Financial Economics 25, 23-49.
13. Fama, E.F., MacBeth, J., 1973. Risk, return, and equilibrium: empirical tests. Journal of Political Economy 71, 607-636.
14. Ferson, W.E., 1989. Changes in expected security returns, risk, and the level of interest rates. Journal of Finance 44, 1191-1217.
15. Harvey, A.C., 1989. Forecasting, Structural Time Series Models and the Kalman Filter. Cambridge Univ. Press, Cambridge.
16. Henriksson, R.D., Merton, R.C., 1981. On market timing and investment performance: II. Statistical procedures for evaluating forecasting skills. Journal of Business 54, 513-533.
17. Kandel, S., Stambaugh, R.F., 1990. Expectations and volatility of consumption and asset returns. Review of Financial Studies 8, 207-232.
18. Kandel, S., Stambaugh, R.F., 1996. On the predictability of stock returns: an asset allocation perspective. Journal of Finance 51, 385-424.
19. Perez-Quiros, G., Timmermann, A., 2000. Firm size and cyclical variations in stock returns. Journal of Finance 55, 1229-1262.
20. Pesaran, M.H., Timmermann, A., 1992. A simple non-parametric test of predictive performance. Journal of Business and Economic Statistics 10, 461-465.
21. Pesaran, M.H., Timmermann, A., 1995. Predictability of stock returns: robustness and economic significance. Journal of Finance 50, 1201-1228.
22. Pesaran, M.H., Timmermann, A., 2000. A recursive modelling approach to predicting U.K. stock returns. The Economic Journal 110, 159-191.
23. Pesaran, M.H., Timmermann, A., 2001. How Costly is it to Ignore Breaks When Forecasting the Direction of a Time Series? Manuscript, University of California, San Diego.
24. Pesaran, M.H., Timmermann, A., 2002. Model Instability and Choice of Observation Window. Manuscript, University of California, San Diego.
25. Rosenberg, B., 1973. Random coefficient models: the analysis of a cross-section of time series by stochastically convergent parameter regression. Annals of Economic and Social Measurement 2, 399-428.
26. Stock, J.H., Watson, M.W., 1996. Evidence on structural instability in macroeconomic time series relations. Journal of Business & Economic Statistics 14, 11-30.
27. Sullivan, R., Timmermann, A., White, H., 1999. Data-snooping, technical trading rule performance, and the bootstrap. Journal of Finance 54, 1647-1692.
28. Whitelaw, R.F., 1994. Time variations and covariations in the expectation and volatility of stock market returns. Journal of Finance 49, 515-541.