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| Author: | Korkie, B. Sivakumar, R. Turtle, H. |
| Title: | The dual contributions of information instruments in return models: magnitude and direction predictability |
| Journal: | Journal of Empirical Finance
2002 : DEC, VOL. 9:5, p. 511-523 |
| Index terms: | Assets Stock markets Forecasting Pricing Models |
| Language: | eng |
| Abstract: | By partitioning asset return prediction errors, this paper shows explicitly the dual role of magnitude and sign prediction of return instruments. It demonstrates analytically that sign prediction directly affects heteroskedasticity in asset returns; increases in precision attenuate the heteroskedasticity. This paper's findings with monthly asset returns are consistent with earlier evidence and indicate that the proposed analytical model captures the sign predictive component of returns. The results are supportive of a nonlinear return generating model. |
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