Elusive Return Predictability ∗

  title={Elusive Return Predictability ∗},
  author={Allan Timmermann},
Investors’ search for successful forecasting models leads the data generating process for financial returns to change over time which means that individual return forecasting models can at best hope to uncover evidence of ‘local’ predictability. We illustrate this point on a suite of forecasting models used to predict US stock returns and propose an adaptive forecast combination approach. Most of the time the forecasting models perform rather poorly, but there is evidence of relatively short… CONTINUE READING
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