The Role of Partisan Conflict in Forecasting the U.S. Equity Premium: A Nonparametric Approach
Rangan Gupta (),
John Weirstrasd Muteba Mwamba () and
Mark Wohar ()
No 201686, Working Papers from University of Pretoria, Department of Economics
Information on partisan conflict is shown to matter in forecasting the U.S. equity premium, especially when accounting for omitted nonlinearities in their relationship, via a nonparametric predictive regression approach over the monthly period 1981:1-2016:6. Unlike as suggested by a linear predictive model, the nonparametric functional coefficient regression that includes the partisan conflict index, enhances significantly the out-of-sample excess stock returns predictability.
Keywords: : Equity Premium; Partisan Conflict Index; Linear and Nonparametric Predictive Regressions (search for similar items in EconPapers)
JEL-codes: C14 C22 C53 G1 G18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for and nep-ore
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Journal Article: The role of partisan conflict in forecasting the U.S. equity premium: A nonparametric approach (2018)
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