Uncovering Regimes in Out of Sample Forecast Errors from Predictive Regressions

Bibliographic Data

ID21512719
AuthorsAnibal Emiliano Da Silva Neto (Department of Economics University of Southampton Southampton UK, corresponding author), Jesús Gonzalo (0000-0002-4309-5025, Department of Economics Universidad Carlos III de Madrid Getafe Madrid Spain, corresponding author), Jean‐Yves Pitarakis (0000-0002-6305-7421, Department of Economics University of Southampton Southampton UK, corresponding author)
Year2021
Volume83
Issue3
Pages713-741
Publication date2021-06-01
Open AccessYes
TypeARTICLE
VenueOxford Bulletin of Economics and Statistics (JOURNAL)
Journal identifiersISSN: 0305-9049 • E-ISSN: 1468-0084
PublisherWiley (PUBLISHER • GB)
DOI10.1111/obes.12418
OpenAlexW3112768792
LanguageEN
References cited29

We introduce a set of test statistics for assessing the presence of regimes in out of sample forecast errors produced by recursively estimated linear predictive regressions that can accommodate multiple highly persistent predictors. Our test statistics are designed to be robust to the chosen starting window size and are shown to be both consistent and locally powerful. Their limiting null distributions are also free of nuisance parameters and hence robust to the degree of persistence of the predictors. Our methods are subsequently applied to the predictability of the value premium whose dynamics are shown to be characterized by state dependence

Econometrics · Null hypothesis · Predictability · Statistics · Complex Systems and Time Series Analysis · Financial Markets and Investment Strategies · Mathematics · Monetary Policy and Economic Impact

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Open DOIOpen Access