Wohar_quantiles_paper_Final.pdf (807.77 kB)
Stock return distribution and predictability: Evidence from over a century of daily data on the DJIA index
journal contribution
posted on 2019-03-28, 11:20 authored by Bartosz Gebka, Mark WoharThis paper analyses the predictive power of the DJIA index returns, measured at different quantiles of its distribution, for future return distribution. The returns measured at quantile 0.75 have predictive power for most quantiles of future returns, except for their median. This result prevails after controlling for the predictive power of the lagged first four moments of returns and of other economic predictors used in the literature. Furthermore, this finding is stable over time. Forecasts of future mean returns based on predicted return quantiles have positive economic value, as do forecasts of future volatility, the latter especially for investors with low risk aversion. The predictive power of quantile 0.75 DJIA returns is shown to be the result of their ability to forecast shocks to future investment and consumption.
History
School
- Business and Economics
Department
- Business
Published in
International Review of Economics and FinanceVolume
60Pages
1 - 25Citation
GEBKA, B. and WOHAR, M.E., 2018. Stock return distribution and predictability: Evidence from over a century of daily data on the DJIA index. International Review of Economics and Finance, 60, pp.1-25.Publisher
© ElsevierVersion
- AM (Accepted Manuscript)
Publisher statement
This paper was accepted for publication in the journal International Review of Economics and Finance and the definitive published version is available at https://doi.org/10.1016/j.iref.2018.12.002Acceptance date
2018-12-02Publication date
2018-12-07Copyright date
2019ISSN
1059-0560Publisher version
Language
- en