Forecasting multivariate time series under present-value-model short- and long-run co-movement restrictions

Osmani Guillén, Alain Hecq, João Issler and Diogo Vinícius Menezes Saraiva

No 742, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: It is well known that cointegration between the level of two variables (e.g. prices and dividends) is a necessary condition to assess the empirical validity of a present-value model (PVM) linking them. The work on cointegration,namelyon long-run co-movements, has been so prevalent that it is often over-looked that another necessary condition for the PVM to hold is that the forecast error entailed by the model is orthogonal to the past. This amounts to investigate whether short-run co-movememts steming from common cyclical feature restrictions are also present in such a system. In this paper we test for the presence of such co-movement on long- and short-term interest rates and on price and dividend for the U.S. economy. We focuss on the potential improvement in forecasting accuracies when imposing those two types of restrictions coming from economic theory.

Date: 2013-07-01
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://repositorio.fgv.br/bitstreams/be75edbe-eda ... a9d7e4f570e/download (application/pdf)

Related works:
Journal Article: Forecasting multivariate time series under present-value model short- and long-run co-movement restrictions (2015)
Working Paper: Forecasting multivariate time series under present-value-model short- and long-run co-movement restrictions (2015)
Working Paper: Forecasting Multivariate Time Series under Present-Value-Model Short- and Long-run Co-movement Restrictions (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgewp:742

Access Statistics for this paper

More papers in FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil) Contact information at EDIRC.
Bibliographic data for series maintained by Núcleo de Computação da FGV EPGE ().