Regime-Specific Return Predictability in Quantiles
Bibliographic Data
| ID | 19420082 |
|---|---|
| Authors | Xinling Xie (0009-0005-3298-7457, Southwestern University of Finance and Economics), Yundong Tu (0000-0002-2556-3614, Peking University, corresponding author) |
| Year | 2026 |
| Pages | 1-14 |
| Publication date | 2026-02-11 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Business and Economic Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0735-0015 • E-ISSN: 1537-2707 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/07350015.2025.2573151 |
| OpenAlex | W7127442069 |
| Language | EN |
| References cited | 46 |
This paper captures the underlying regime switching mechanism in the prediction of stock returns via a predictive quantile regression with multiple thresholds. The predictability of each predictor is allowed to switch from one regime to another according to the value of a threshold variable and could vary across quantiles, and the predictors could possess heterogeneous degrees of persistence. Statistical learning techniques, including a sequential estimation procedure, an adaptive group Lasso refinement and a backward elimination algorithm, are adopted to estimate the unknown multiple thresholds. The adaptive Lasso is then applied to identify the important predictors in each regime to improve prediction accuracy at each quantile. Asymptotic properties of the proposed estimators are established, which are further corroborated with their nice finite sample performance revealed in simulations. The empirical analysis for the U.S. stock returns shows that the return predictability of several predictors changes with the economic states across the quantiles, demonstrating the regime-specific return predictability in quantiles
Estimator · Predictability · Quantile · Quantile regression · Regression · Sample size determination · Financial Risk and Volatility Modeling · Risk and Portfolio Optimization · Statistical Methods and Inference
Model Selection and Estimation in Regression with Grouped Variables
Sample Splitting and Threshold Estimation
A Comprehensive Look at The Empirical Performance of Equity Premium Prediction
The Adaptive Lasso and Its Oracle Properties
Extended Bayesian information criteria for model selection with large model spaces
Quantile cointegrating regression
Measuring Economic Policy Uncertainty
Regression Quantiles
Testing for Structural Change of Predictive Regression Model to Threshold Predictive Regression Model
Unified Tests for a Dynamic Predictive Regression
Inferring the Predictability Induced by a Persistent Regressor in a Predictive Threshold Model
Real-Time Measurement of Business Conditions
Regime-Specific Predictability in Predictive Regressions
| Highly cited | No |
|---|