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Forecasting returns: new European evidence

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journal contribution
posted on 2017-03-03, 11:49 authored by Steven J. Jordan, Andrew VivianAndrew Vivian, Mark Wohar
This paper builds on the recent debate on the in-sample and out-of-sample predictability of US aggregate returns using a wide range of predictors by providing new evidence for smaller and less market-oriented European countries. We find evidence that macro and technical predictors can (statistically) improve forecast accuracy and (economically) generate gains to investors; in contrast to the US results, predictability in our sample of European countries exists in recent data. We also find that simple forecast combinations consistently yield substantial benefits both in forecast accuracy and economic gain. For example, the magnitude of the forecasting gains for our European countries is often larger than those found for the US and other G7 countries. We provide initial evidence on the link between country characteristics and out-of-sample forecast performance. Our empirical results indicate that market development is related to the forecast performance of macro variables. There is also some evidence that forecast performance is related to market size and liquidity.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Empirical Finance

Volume

26

Pages

76 - 95

Citation

JORDAN, S.J., VIVIAN, A.J. and WOHAR, M.E., 2014. Forecasting returns: new European evidence. Journal of Empirical Finance, 26 pp.76-95

Publisher

© Elsevier B.V.

Version

  • AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Acceptance date

2014-02-04

Publication date

2014-02-12

ISSN

0927-5398

Language

  • en