|Appears in Collections:||Economics Journal Articles|
|Peer Review Status:||Refereed|
|Title:||Stock return predictability and dividend-price ratio: a nonlinear approach|
Wohar, Mark E
|Citation:||McMillan D & Wohar ME (2010) Stock return predictability and dividend-price ratio: a nonlinear approach, International Journal of Finance and Economics, 15 (4), pp. 351-365.|
|Abstract:||This paper examines the forecasting ability of the dividend–price ratio for international stock market returns. Hitherto, existing research has only considered this issue in sample and in a linear framework. Hence, this paper provides the first systematic study of non-linear forecasting within the present value model context. Using an asymmetric variant of the popular exponential smooth-transition (ESTR) model we demonstrate the superior forecasting ability for the G7 markets over both a linear and symmetric ESTR model on the basis of a variety of forecast performance tests. In particular, the asymmetric-ESTR model provides improved mean forecast error metrics that are largely significant on the basis of forecast equality tests. Furthermore, in a trading rule exercise this models provides superior trading returns. As a final exercise we compare the forecasting performance of the individual models with those obtained through forecast combination. These results support the individual models on the basis of forecast error tests but suggest the combination strategy may be more profitable. These results are of importance not only for model builders but also for market participants looking to undertake active investment strategies.|
|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.|
|McMillan_et_al-2010-International_Journal_of_Finance_&_Economics.pdf||148.07 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.