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Predictive regressions (1999)
| Venue: | Journal of Financial Economics |
| Citations: | 466 - 20 self |
BibTeX
@ARTICLE{Stambaugh99predictiveregressions,
author = {Robert F. Stambaugh},
title = {Predictive regressions},
journal = {Journal of Financial Economics},
year = {1999},
pages = {375--421}
}
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Abstract
When a rate of return is regressed on a lagged stochastic regressor, such as a dividend yield, the regression disturbance is correlated with the regressor's innovation. The OLS estimator's "nite-sample properties, derived here, can depart substantially from the standard regression setting. Bayesian posterior distributions for the regression parameters are obtained under speci"cations that di!er with respect to (i) prior beliefs about the autocorrelation of the regressor and (ii) whether the initial observation of the regressor is speci"ed as "xed or stochastic. The posteriors di!er across such speci"cations, and asset allocations in the presence of estimation risk exhibit sensitivity to those
Keyphrases
predictive regression speci cation nite-sample property regression disturbance ols estimator dividend yield speci ed bayesian posterior distribution regression parameter stochastic regressor standard regression setting initial observation asset allocation estimation risk exhibit sensitivity
