Time-varying predictability of the long horizon equity premium based on semiparametric regressions

Yu, Deshui; Chen, Li; Li, Luyang

doi:10.1016/j.econlet.2023.111033

Cited by 3 publications

(1 citation statement)

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“…For the practical use of the proposed estimator, we need to choose a kernel function and a bandwidth. Throughout the paper, we use the rule of thumb bandwidth

h = 2.34\sqrt {1/12}T^{-1/5}

and use Epanechnikov kernel

K(u) = 0.75(1-u^2)I(|u|\le 1)

as the kernel function following most of the literature (see, e.g., Ang & Kristensen, 2012; Chen et al., 2012; Chen et al., 2018; Yu and Huang, 2021; Yu et al., 2023b; and many others. )…”

Section: Econometric Methodologiesmentioning

confidence: 99%

Joint dynamics of stock returns and cash flows: A time‐varying present‐value framework

Yu,

Yan

2023

Financial Management

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This paper proposes a novel time‐varying present‐value model to analyze the joint dynamics of stock returns and cash flows periodically. We use a nonparametric time‐varying vector autoregressive model to examine the economic implications of the time‐varying present‐value model. By conducting several nonparametric tests, we reject the stability of multivariate forecasting models and the null that stock returns and cash flows are simultaneously unpredictable in any given period. Additional bootstrap analyses show that under the null of unpredictable returns, dividend growth is highly predictable. Finally, the proposed time‐varying present‐value framework holds robustly for both the dividend–price ratio and the earnings–price ratio.

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“…For the practical use of the proposed estimator, we need to choose a kernel function and a bandwidth. Throughout the paper, we use the rule of thumb bandwidth

h = 2.34\sqrt {1/12}T^{-1/5}

and use Epanechnikov kernel

K(u) = 0.75(1-u^2)I(|u|\le 1)

as the kernel function following most of the literature (see, e.g., Ang & Kristensen, 2012; Chen et al., 2012; Chen et al., 2018; Yu and Huang, 2021; Yu et al., 2023b; and many others. )…”

Section: Econometric Methodologiesmentioning

confidence: 99%