International Stock Return Predictability under Model Uncertainty


Schrimpf, Andreas


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URL: http://ub-madoc.bib.uni-mannheim.de/2053
URN: urn:nbn:de:bsz:180-madoc-20533
Document Type: Working paper
Year of publication: 2008
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: E44 G15 G14 G12 ,
Subject headings (SWD): Börsenkurs , Kapitalertrag , Wertpapieranalyse , Bayes-Entscheidungstheorie , Aktienmarkt , Internationaler Kreditmarkt
Keywords (English): Stock Return Predictability , Bayesian Model Averaging , Model Uncertainty , International Stock Markets
Abstract: This paper examines return predictability when the investor is uncertain about the right state variables. A novel feature of the model averaging approach used in this paper is to account for finite-sample bias of the coeffcients in the predictive regressions. Drawing on an extensive international dataset, we find that interest-rate related variables are usually among the most prominent predictive variables, whereas valuation ratios perform rather poorly. Yet, predictability of market excess returns weakens substantially, once model uncertainty is accounted for. We document notable differences in the degree of in-sample and out-of-sample predictability across diferent stock markets. Overall, these findings suggests that return predictability is not a uniform and a universal feature across international capital markets.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Schrimpf, Andreas (2008) International Stock Return Predictability under Model Uncertainty. Open Access [Working paper]
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