Nonlinear predictability of stock market returns: Evidence from nonparametric and threshold models

International Review of Economics and Finance

Volumn 10, Issue 4, 2001, Pages 353-368

  McMillan, David G ^a  

^a UNIVERSITY OF ST ANDREWS   (United Kingdom)

Author keywords

Nonparametric regression; Predictability; STARX model; Stock market returns

Indexed keywords

EID: 0345270540     PISSN: 10590560     EISSN: None     Source Type: Journal    
DOI: 10.1016/S1059-0560(01)00093-4     Document Type: Article

References (36)

1. Abhyankar, A., Copeland, L. S., & Wong, W. (1997). Uncovering nonlinear structure in real-time stock market indices. Journal of Business and Economics Statistics, 15, 1-14.
2. Balvers, R. J., Cosimano, T. F., & McDonald, B. (1990). Predicting stock returns in an efficient market. Journal of Finance, 45, 1109-1128.
3. Breen, W., Glosten, L. R., & Jagannathan, R. (1990). Predictable variations in stock index returns. Journal of Finance, 44, 1177-1189.
4. Campbell, J. Y. (1987). Stock returns and the term structure. Journal of Financial Economics, 18, 3-37.
5. Campbell, J. Y., & Hamao, Y. (1992). Predictable stock returns in the United States and Japan: a study of long-term capital integration. Journal of Finance, 47, 43-67.
6. Chan, K., & Tong, H. (1986). On estimating thresholds in autoregressive models. Journal of Time Series Analysis, 7, 179-194.
7. Cochrane, J. H. (1991). Production-bases asset pricing and the link between stock return and economic fluctuations. Journal of Finance, 46, 209-238.
8. Delgado, M. A., & Robinson, P. M. (1992). Nonparametric and semiparametric methods for economic research. Journal of Economic Surveys, 6, 201-249.
9. Diebold, F. X., & Mariano, R. S. (1995). Comparing predictive accuracy. Journal of Business and Economic Statistics, 13, 253-265.
10. Epanechnikov, V. A. (1969). Nonparametric estimation of a multivariate probability density. Theory of Probability and its Applications, 14, 153-158.
11. Fama, E. F., & French, K. R. (1989). Business conditions and expected returns on stocks and bonds. Journal of Financial Economics, 25, 23-49.
12. Ferson, W. E., & Harvey, C. R. (1993). The risk and predictability of international equity returns. Review of Financial Studies, 6, 527-566.
13. French, K. R., Schwert, G. S., & Stambaugh, R. F. (1987). Expected stock returns and volatility. Journal of Financial Economics, 19, 3-30.
14. Glosten, L. R., Jagannathan, R., & Runkle, D. E. (1993). On the relation between the expected value and the volatility of the nominal excess return on stocks. Journal of Finance, 48, 1779-1801.
15. Granger, C. W. J., & Teräsvirta, T. (1993). Modelling nonlinear economic relationships. Oxford: Oxford University Press.
16. Haggan, V., & Ozaki, T. (1981). Modelling non-linear random vibrations using an amplitude-dependent autoregressive time series model. Biometrika, 68, 189-196.
17. Härdle, W. (1990). Applied nonparametric regression. Cambridge: Cambridge University Press.
18. Keim, D. B., & Stambaugh, R. F. (1986). Predicting returns in the stock and bond markets. Journal of Financial Economics, 17, 357-390.
19. Nadaraya, E. A. (1964). On estimating regression. Theory of Probability and its Applications, 9, 141-142.
20. Pagan, A. R., & Schwert, G. W. (1990). Alternative models for conditional stock market volatility. Journal of Econometrics, 45, 267-290.
21. Perez-Quiros, G., & Timmermann, A. (2000). Firm size and cyclical variations in stock returns. Journal of Finance, 55, 1229-1262.
22. Pesaran, M. H., & Timmermann, A. (1995). Predictability of stock returns: robustness and economic significance. Journal of Finance, 50, 1201-1228.
23. Pesaran, M. H., & Timmermann, A. (2000). A recursive modelling approach to predicting UK stock returns. Economic Journal, 110, 159-191.
24. Poterba, J. M., & Summers, L. H. (1988). Mean reversion in stock prices. Journal of Financial Economics, 22, 27-59.
25. Prakasa Rao, B. L. S. (1983). Nonparametric functional estimation. Orlando: Academic Press.
26. Qi, M. (1999). Nonlinear predictability of stock returns using financial and economic variables. Journal of Business and Economic Statistics, 17, 419-429.
27. Robinson, P. M. (1983). Nonparametric estimators for time series. Journal of Time Series Analysis, 4, 185-207.
28. Rosenblatt, M. (1956). Remarks on some nonparametric estimates of density function. Annals of Mathematical Statistics, 27, 832-837.
29. Silverman, B. W. (1986). Density estimation of statistics and data analysis. London: Chapman & Hall.
30. Stone, C. J. (1974). Cross-validatory choice and assessment of statistical predictions (with discussion). Journal of Royal Statistical Society, 36, 111-147.
31. Stone, C. J. (1977). Consistent nonparametric regression (with discussion). Annals of Statistics, 5, 595-645.
32. Stone, C. J. (1984). An asymptotically optimal window selection rule for kernel density estimates. Annals of Statistics, 12, 1285-1297.
33. Teräsvirta, T. (1994). Specification, estimation, and evaluation of smooth transition autoregressive models. Journal of the American Statistical Association, 89, 208-218.
34. Teräsvirta, T., & Anderson, H. M. (1992). Characterising nonlinearities in business cycles using smooth transition autoregressive models. Journal of Applied Econometrics, 7, S119-S136.
35. Ullah, A. (1998). Non-parametric estimation of econometric functionals. Canadian Journal of Economics, 21, 625-656.
36. Watson, G. S. (1964). Smooth regression analysis. Sanikhya, 26, 175-184.