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Is stock return predictability time-varying?

journal contribution
posted on 01.01.2018, 00:00 authored by Neluka Devpura, Paresh Narayan, Susan SharmaSusan Sharma
Using historical data (January 1927 to December 2014), this paper shows that stock return predictability is time-varying based on several well-known predictors from the literature. However, only 7 of 14 predictors exhibit this time-varying predictability pattern. For the remaining predictors, either there is no predictability or predictability is not time-dependent. We also examine the determinants of time-varying predictability. We show that (a) both expected and unexpected shocks emanating from financial variables, and (b) phases of predictability (which capture market volatility) explain return predictability.

History

Journal

Journal of international financial markets, institutions and money

Volume

52

Pagination

152 - 172

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

1042-4431

Language

eng

Publication classification

C Journal article; C1 Refereed article in a scholarly journal

Copyright notice

2017, Elsevier B.V.