Testing for Predictability in Conditionally Heteroskedastic Stock Returns

Joakim Westerlund and Paresh Narayan ()

Journal of Financial Econometrics, 2015, vol. 13, issue 2, 342-375

Abstract: The difficulty of predicting stock returns has recently motivated researchers to start looking for more powerful tests, and the current study takes a step in this direction. Unlike existing tests, the test proposed here exploits the information contained in the heteroskedasticity of findings, which is expected to lead to higher power, a result that is confirmed by our results. In order to also maintain good size accuracy, subsample critical values are used.

Keywords: predictability; FQGLS; conditional heteroskedasticity; subsampling; stock returns (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (134)

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Working Paper: Testing for predictability in conditionally heteroskedastic stock returns (2014)
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