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| Author: | Herwartz, H. Morales-Arias, L. |
| Title: | In-sample and out-of-sample properties of international stock return dynamics conditional on equilibrium pricing factors |
| Journal: | European Journal of Finance
2009 : JAN/FEB, VOL. 15:1-2, p. 1-28 |
| Index terms: | emerging markets international assets pricing stock returns forecasting Europe |
| Language: | eng |
| Abstract: | This study analyses in-sample (henceforth as: in-s.) and out-of-sample (here as: o-of-s.) properties of stock return dynamics in 14 developed and 12 emerging markets. Based on a formulated model, both in-s. and o-of-s. panel modeling techniques are designed to examine international stock market returns at short and long horizons. It is found that i. there is evidence of in-s. signaling from the equilibrium (here as: eql.) relations (as: rels). However, this feature does not seem to translate into o-of-s. forecasting (as: f-g.), ii. a rolling window f-g. scheme can better approximate the distributional features of returns in comparison with a recursive method, iii. f-g. with single-lagged eql. rels. does not play a uniformly significant role in foretelling returns, iv. f-g. with a full model containing all lagged eql. rels. can outperform both a random walk model and a VAR(1) model and (v) linear combinations of alternative forecasts reduce ex-ante uncertainty. |
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