Abstract

http://ssrn.com/abstract=965336
 
 

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Return Predictability Revisited


Ben Jacobsen


University of Edinburgh - Business School; New Zealand Institute of Advanced Study

Ben R. Marshall


Massey University - Department of Economics and Finance

Nuttawat Visaltanachoti


Massey University - Department of Economics and Finance

October 30, 2008

EFA 2007 Ljubljana Meetings Paper
21st Australasian Finance and Banking Conference 2008 Paper

Abstract:     
Monthly stock market returns are predictable when we refine the observation intervals of the variables used to predict these returns. Contrary to other predictability studies we find high out-of-sample adjusted R2s of up to 7% using economically important commodity returns. Shorter intervals reveal predictability consistent with near efficient markets based on price changes in industrial metals. More historical intervals expose predictability consistent with gradual information diffusion based on energy series. This predictability is robust to data mining adjustment, the inclusion of control (including economic) variables, and unrelated to time-varying risk. Inflation explains part of this predictability, but not all.

Number of Pages in PDF File: 73

Keywords: observation interval, return predictability tests, market efficiency, gradual information diffusion, market timing, quantitative investment techniques, commodity

JEL Classification: C8, G1

working papers series


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Date posted: February 25, 2007 ; Last revised: November 19, 2009

Suggested Citation

Jacobsen, Ben and Marshall, Ben R. and Visaltanachoti, Nuttawat, Return Predictability Revisited (October 30, 2008). EFA 2007 Ljubljana Meetings Paper; 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: http://ssrn.com/abstract=1284856 or http://dx.doi.org/10.2139/ssrn.1284856

Contact Information

Ben Jacobsen (Contact Author)
University of Edinburgh - Business School ( email )
University of Edinburgh
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
UNITED KINGDOM
New Zealand Institute of Advanced Study ( email )
Auckland
New Zealand
Ben R. Marshall
Massey University - Department of Economics and Finance ( email )
Private Bag 11-222
Palmerston North, 30974
New Zealand
64 6 350 5799 (Phone)
64 6 350 5651 (Fax)
Nuttawat Visaltanachoti
Massey University - Department of Economics and Finance ( email )
School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (9460) (Phone)
64 9 441 8177 (Fax)
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