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Title:International Stock Return Predictability Under Model Uncertainty PDF Logo
Authors:Schrimpf, Andreas
Issue Date:2008
Series/Report no.:ZEW Discussion Papers 08-048
Abstract:This paper examines return predictability when the investor is uncertain about the right state variables. A novel feature of the model averaging approach used in this paper is to account for finite-sample bias of the coefficients in the predictive regressions. Drawing on an extensive international dataset, we find that interest-rate related variables are usually among the most prominent predictive variables, whereas valuation ratios perform rather poorly. Yet, predictability of market excess returns weakens substantially, once model uncertainty is accounted for. We document notable differences in the degree of in-sample and out-of-sample predictability across different stock markets. Overall, these findings suggests that return predictability is not a uniform and a universal feature across international capital markets.
Subjects:Stock Return Predictability
Bayesian Model Averaging
Model Uncertainty
International Stock Markets
JEL:G14
G15
G12
E44
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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