Zhang, Hongwei
[VerfasserIn]
;
He, Qiang
[Sonstige Person, Familie und Körperschaft];
Jacobsen, Ben
[Sonstige Person, Familie und Körperschaft];
Jiang, Fuwei
[Sonstige Person, Familie und Körperschaft]
Forecasting Stock Returns with Model Uncertainty and Parameter Instability
Anmerkungen:
In: Journal of Applied Econometrics, Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 16, 2019 erstellt
Beschreibung:
We compare several representative sophisticated model averaging and variable selection techniques of forecasting stock returns. When estimated traditionally, our results confirm that the simple combination of individual predictors is superior. However, sophisticated models improve dramatically once we combine them with the historical average and take parameter instability into account. An equal weighted combination of the historical average with the standard multivariate predictive regression estimated using the average windows method, for example, achieves a statistically significant monthly out-of-sample R2 of 1.10% and annual utility gains of 2.34%. We obtain similar gains for predicting future macro economic conditions