Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197935 
Year of Publication: 
2017
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2017-10
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We develop a simulation-based procedure to test for stock return predictability with multiple regressors. The process governing the regressors is left completely free and the test procedure remains valid in small samples even in the presence of non-normalities and GARCH-type effects in the stock returns. The usefulness of the new procedure is demonstrated both in a simulation study and by examining the ability of a group of financial variables to predict excess stock returns. We find robust evidence of predictability during the period 1948-2014, driven entirely by the term spread. This empirical evidence, however, is much weaker over subsamples.
Subjects: 
Econometric and statistical methods
Asset pricing
Financial markets
JEL: 
C12
C32
G14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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