Reverse Regressions and Long-Horizon Forecasting

@inproceedings{Wei2010ReverseRA,
  title={Reverse Regressions and Long-Horizon Forecasting},
  author={Min Wei and Jonathan H. Wright},
  year={2010}
}
Long-horizon predictive regressions in …nance pose formidable econometric problems when estimated using available sample sizes. Hodrick (1992) proposed a remedy that is based on running a reverse regression of short-horizon returns on the long-run mean of the predictor. Unfortunately, this only allows the null of no predictability to be tested, and assumes stationary regressors. In this paper, we revisit long-horizon forecasting from reverse regressions, and argue that reverse regression… CONTINUE READING

References

Publications referenced by this paper.
Showing 1-10 of 12 references

Comment on “Can Central Banks Target Bond Prices?”in Monetary Policy in an Environment of Low In‡ation

  • Sack, Brian
  • Proceedings of the Bank of Korea International…
  • 2006

On Predicting Stock Returns with Nearly Integrated Explanatory Variables

  • Torous, Walter, Rossen Valkanov, Shu Yan
  • Journal of Business,
  • 2004

Why Long Horizons? A Study of Power Against

  • Campbell, Y John
  • 2001

Predictive Regressions

  • Stambaugh, Robert
  • Journal of Financial Economics,
  • 1999

VAR, Error Correction and Pretest Forecasts at Long Horizons

  • Stock, H James
  • Oxford Bulletin of Economics and Statistics,
  • 1996

Con…dence Intervals for the Largest Autoregressive Root in U.S. macroeconomic time series

  • Stock, H James
  • Journal of Monetary Economics,
  • 1991