Abstract
This paper examines the economic significance of return predictability in Australian equities. In light of considerable model uncertainty, formal model-selection criteria are used to choose a specification for the predictive model. A portfolio-switching strategy is implemented according to model predictions. Relative to a buy-and-hold market investment, the returns to the portfolio-switching strategy are impressive under several model-selection criteria, even after accounting for transaction costs. However, as these findings are not robust across other model-selection criteria examined, it is difficult to conclude that the degree of return predictability is economically significant.
Original language | English |
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Pages (from-to) | 135-151 |
Number of pages | 17 |
Journal | Economic Record |
Volume | 81 |
Issue number | 253 |
DOIs | |
Publication status | Published - Jun 2005 |
ASJC Scopus subject areas
- Economics and Econometrics