On the Short-Term Predictability of Stock Returns: A Quantile Boosting Approach

15 Pages Posted: 17 Oct 2016

See all articles by Riza Demirer

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance; Economic Research Forum (ERF)

Christian Pierdzioch

University of the German Federal Armed Forces - Department of Economics

Huacheng Zhang

Southwestern University of Finance and Economics - Institute of Financial Studies

Date Written: October 14, 2016

Abstract

We study the predictability of stock returns using an iterative model-building approach known as quantile boosting. Examining alternative return quantiles that represent normal, bull and bear markets via recursive quantile regressions, we trace the predictive value of extensively studied predictors including the recently suggested short interest and sentiment variables. We find that short-term returns are predictable to some extent for extreme lower quantiles of the conditional distribution of returns. Interestingly, however, short-interest and sentiment variables do not add significant predictive power, challenging the recent findings on the predictive ability of short sellers for future cash flows and associated market returns.

Keywords: Stock returns, Predictability, Quantile boosting

JEL Classification: C22, C53, Q02

Suggested Citation

Demirer, Riza and Pierdzioch, Christian and Zhang, Huacheng, On the Short-Term Predictability of Stock Returns: A Quantile Boosting Approach (October 14, 2016). Available at SSRN: https://ssrn.com/abstract=2852477 or http://dx.doi.org/10.2139/ssrn.2852477

Riza Demirer (Contact Author)

Southern Illinois University Edwardsville - Department of Economics & Finance ( email )

Department of Economics & Finance
Alumni Hall 3144
Edwardsville, IL 62026-1102
United States
(618) 650-2939 (Phone)
(618) 650-3047 (Fax)

HOME PAGE: http://www.siue.edu/~rdemire/

Economic Research Forum (ERF)

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Cairo, Cairo
Egypt

HOME PAGE: http://erf.org.eg/affiliates/riza-demirer-3/

Christian Pierdzioch

University of the German Federal Armed Forces - Department of Economics ( email )

Holstenhofweg 85
Hamburg, 22043
Germany

Huacheng Zhang

Southwestern University of Finance and Economics - Institute of Financial Studies ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

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