|Appears in Collections:||Economics Journal Articles|
|Peer Review Status:||Refereed|
|Title:||Non-linear forecasting of stock returns: Does volume help?|
|Keywords:||Stock market returns|
|Citation:||McMillan D (2007) Non-linear forecasting of stock returns: Does volume help?, International Journal of Forecasting, 23 (1), pp. 115-126.|
|Abstract:||The testing for and estimation of non-linear dynamics in equity returns is a growing area of empirical finance research. This paper extends this line of research by examining whether a hitherto unconsidered variable, namely volume, imparts non-linear dynamics within equity returns and whether it has forecasting power. A significant amount of evidence supports a negative relationship between volume and future returns, which in turn suggests that volume could act as a suitable threshold variable. The results presented here provide evidence of a logistic smooth-transition model for four international stock market returns, with lagged volume as the threshold. Further, this model provides better out-of-sample forecasts than a corresponding logistic smooth-transition autoregressive model, a simple AR model and a random walk model based on a trading rule. In addition, this model also provides better forecasting performance in three cases against alternate non-linear specifications. This provides evidence in favour of non-linear dynamics, in contrast with previous evidence, which had suggested the relative failure of non-linear models in forecasting exercises.|
|Rights:||The publisher does not allow this work to be made publicly available in this Repository. Please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author. You can only request a copy if you wish to use this work for your own research or private study.|
|1-s2.0-S0169207006000653-main.pdf||169.34 kB||Adobe PDF||Under Permanent Embargo Request a copy|
Note: If any of the files in this item are currently embargoed, you can request a copy directly from the author by clicking the padlock icon above. However, this facility is dependent on the depositor still being contactable at their original email address.
This item is protected by original copyright
Items in the Repository are protected by copyright, with all rights reserved, unless otherwise indicated.
If you believe that any material held in STORRE infringes copyright, please contact firstname.lastname@example.org providing details and we will remove the Work from public display in STORRE and investigate your claim.