Forecasting stock returns using model-selection criteria

Jamie Alcock, Philip Gray*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

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 languageEnglish
Pages (from-to)135-151
Number of pages17
JournalEconomic Record
Volume81
Issue number253
DOIs
Publication statusPublished - Jun 2005

ASJC Scopus subject areas

  • Economics and Econometrics

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