Forecasting the direction of the US stock market with dynamic binary probit models

@inproceedings{Nyberg2011ForecastingTD,
  title={Forecasting the direction of the US stock market with dynamic binary probit models},
  author={Henri Nyberg},
  year={2011}
}
Several empirical studies have documented that the signs of excess stock returns are, to some extent, predictable. In this paper, we consider the predictive ability of the binary dependent dynamic probit model in predicting the direction of monthly excess stock returns. The recession forecast obtained from the model for a binary recession indicator appears to be the most useful predictive variable, and once it is employed, the sign of the excess return is predictable in-sample. The new dynamic… CONTINUE READING

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