Feedback Trading and Predictability of Stock Returns in Germany, 1880?1913

Christian Pierdzioch

No 1213, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: I use a time-varying parameter model in order to study the predictability of monthly real stock returns in Germany over the period 1880?1913. I find that the extent to which returns were predictable underwent significant changes over time. Specifically, predictability of returns, as measured by their first-order autocorrelation coefficient, was positive most of the time. It tended to be significant during extended periods of stock market decline, but not during periods of stock market increase. I argue that this timepattern of predictability of returns is consistent with feedback effects of futures trading on the spot market.

Keywords: Stock market; Return Predictability; Germany (search for similar items in EconPapers)
JEL-codes: G14 N24 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1213

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