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A new GARCH model with higher moments for stock return predictability
journal contributionposted on 01.09.2018, 00:00 authored by Paresh Narayan, Ruipeng LiuRuipeng Liu
The main purpose of the paper is to propose a new GARCH-SK predictive regression model that accommodates higher order moments (skewness and kurtosis) in testing the null hypothesis of no predictability. Using an extensive and well-known time-series dataset on stock returns and 19 predictors for the United States, we show that our proposed GARCH-SK model outperforms a model without these higher moments. The superior performance of our proposed model holds both statistically and economically and is robust to different data frequencies.