Semiparametric Single-Index Predictive Regression

60 Pages Posted: 4 Aug 2018 Last revised: 4 Sep 2019

See all articles by Weilun Zhou

Weilun Zhou

Econometrics and Business Statistics

Jiti Gao

Monash University - Department of Econometrics & Business Statistics

David Harris

University of Melbourne - Department of Economics

Hsein Kew

Monash University - Department of Econometrics & Business Statistics

Date Written: July 15, 2018

Abstract

This paper studies a semi-parametric single-index predictive regression model with multiple nonstationary predictors that exhibit co-movement behaviour. Orthogonal series expansion is employed to approximate the unknown link function in the model and the estimator is derived from an optimization under the constraint of identification condition for index parameter. The main finding includes two types of super-consistency rates of the estimators of the index parameter along two orthogonal directions in a new coordinate system. The central limit theorem is established for a plug-in estimator of the unknown link function. In the empirical studies, we provide evidence in favour of nonlinear predictability of the stock return using long term yield and treasury bill rate.

Keywords: Predictive Regression; Single-Index Model; Hermite Orthogonal Estimation; Dual Super-Consistency Rates; Co-Moving Predictors

JEL Classification: C22; C53; G12

Suggested Citation

Zhou, Weilun and Gao, Jiti and Harris, David and Kew, Hsein, Semiparametric Single-Index Predictive Regression (July 15, 2018). Available at SSRN: https://ssrn.com/abstract=3214042 or http://dx.doi.org/10.2139/ssrn.3214042

Weilun Zhou

Econometrics and Business Statistics ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Jiti Gao (Contact Author)

Monash University - Department of Econometrics & Business Statistics ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
Australia
61399031675 (Phone)
61399032007 (Fax)

HOME PAGE: http://www.jitigao.com

David Harris

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Hsein Kew

Monash University - Department of Econometrics & Business Statistics ( email )

26 Sir John Monash Drive
Caulfield East, 3145, Victoria
Australia

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