Economics at your fingertips  

Testing The Predictability Of Stock Returns

Markku Lanne

The Review of Economics and Statistics, 2002, vol. 84, issue 3, 407-415

Abstract: Previous literature indicates that stock returns are predictable by several strongly autocorrelated forecasting variables, especially at longer horizons. It is suggested that this finding is spurious and follows from a neglected near unit root problem. Instead of the commonly used t-test, we propose a test that can be considered as a general test of whether the return can be predicted by any highly persistent variable. Using this test, no predictability is found for U.S. stock return data from the period 1928-1996. Simulation experiments show that the standard t-test clearly overrejects whereas our proposed test controls size much better. © 2002 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (46) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Testing the Predictability of Stock Returns (2000)
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:

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by Ann Olson ().

Page updated 2022-08-09
Handle: RePEc:tpr:restat:v:84:y:2002:i:3:p:407-415