A Robust Inference for Predictive Expectile Regression: An IVX-Based Approach

Zongwu Cai and Wei Long
Additional contact information
Zongwu Cai: Department of Economics, The University of Kansas, Lawrence, KS 66045, USA
Wei Long: Department of Economics, Tulane University, New Orleans, LA 70118, USA

No 202610, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: This paper develops a persistence-robust inferential framework for predictive expectile regression with highly persistent regressors. We combine expectile score equations with IVX instruments to construct an IVX-expectile estimator that preserves the distributional interpretation of expectile regression while regularizing the nonstandard effects of near-unit-root regressors, endogeneity, and conditional heteroscedasticity. For fixed expectile levels, we establish consistency and asymptotic normality of the estimator and show that the associated Wald statistic converges to a standard chi-square distribution. Simulation evidence indicates that the proposed procedure delivers accurate size for regressors with differential persistence, with only a modest local-power cost relative to conventional methods. In an application to monthly and quarterly U.S. stock return predictability, the method detects substantially asymmetric predictive ability across expectiles, showing that IVX-expectile regression provides a useful tool for studying heterogeneous predictive effects and downside tail risk when predictors are highly persistent.

Keywords: IVX inference; Persistent predictors; Predictive expectile regression; Stock return (search for similar items in EconPapers)
JEL-codes: C32 C51 C58 (search for similar items in EconPapers)
Date: 2026-03, Revised 2026-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://kuwpaper.ku.edu/2026Papers/202610.pdf (application/pdf)

Related works:
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:kan:wpaper:202610

Access Statistics for this paper

More papers in WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Professor Zongwu Cai ().