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| Title: | | International Stock Return Predictability Under Model Uncertainty  |
| 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: | | Publikationen von Forscherinnen und Forschern des ZEW ZEW Discussion Papers
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