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Regime shifts and stock return predictability

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Regime shifts and stock return predictability. / Hammerschmid, Regina; Lohre, Harald.
In: International Review of Economics and Finance, Vol. 56, 31.07.2018, p. 138-160.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Hammerschmid, R & Lohre, H 2018, 'Regime shifts and stock return predictability', International Review of Economics and Finance, vol. 56, pp. 138-160. https://doi.org/10.1016/j.iref.2017.10.021

APA

Hammerschmid, R., & Lohre, H. (2018). Regime shifts and stock return predictability. International Review of Economics and Finance, 56, 138-160. https://doi.org/10.1016/j.iref.2017.10.021

Vancouver

Hammerschmid R, Lohre H. Regime shifts and stock return predictability. International Review of Economics and Finance. 2018 Jul 31;56:138-160. Epub 2017 Nov 3. doi: 10.1016/j.iref.2017.10.021

Author

Hammerschmid, Regina ; Lohre, Harald. / Regime shifts and stock return predictability. In: International Review of Economics and Finance. 2018 ; Vol. 56. pp. 138-160.

Bibtex

@article{8f91c54204b94f63a45fc3fc59852a48,
title = "Regime shifts and stock return predictability",
abstract = "Identifying economic regimes is useful in a world of time-varying risk premia. We apply regime switching models to common factors proxying for the macroeconomic regime and show that the ensuing regime factor is relevant in forecasting the equity risk premium. Moreover, the relevance of this regime factor is preserved in the presence of fundamental variables and technical indicators which are known to predict equity risk premia. Based on multiple predictive regressions and pooled forecasts, the macroeconomic regime factor is deemed complementary relative to the fundamental and technical information sets. Finally, these forecasts exhibit significant out-of-sample predictability that ultimately translates into considerable utility gains in a mean-variance portfolio strategy.",
keywords = "Predictive regressions, Regime switching, Return predictability",
author = "Regina Hammerschmid and Harald Lohre",
year = "2018",
month = jul,
day = "31",
doi = "10.1016/j.iref.2017.10.021",
language = "English",
volume = "56",
pages = "138--160",
journal = "International Review of Economics and Finance",
issn = "1059-0560",
publisher = "Elsevier Inc.",

}

RIS

TY - JOUR

T1 - Regime shifts and stock return predictability

AU - Hammerschmid, Regina

AU - Lohre, Harald

PY - 2018/7/31

Y1 - 2018/7/31

N2 - Identifying economic regimes is useful in a world of time-varying risk premia. We apply regime switching models to common factors proxying for the macroeconomic regime and show that the ensuing regime factor is relevant in forecasting the equity risk premium. Moreover, the relevance of this regime factor is preserved in the presence of fundamental variables and technical indicators which are known to predict equity risk premia. Based on multiple predictive regressions and pooled forecasts, the macroeconomic regime factor is deemed complementary relative to the fundamental and technical information sets. Finally, these forecasts exhibit significant out-of-sample predictability that ultimately translates into considerable utility gains in a mean-variance portfolio strategy.

AB - Identifying economic regimes is useful in a world of time-varying risk premia. We apply regime switching models to common factors proxying for the macroeconomic regime and show that the ensuing regime factor is relevant in forecasting the equity risk premium. Moreover, the relevance of this regime factor is preserved in the presence of fundamental variables and technical indicators which are known to predict equity risk premia. Based on multiple predictive regressions and pooled forecasts, the macroeconomic regime factor is deemed complementary relative to the fundamental and technical information sets. Finally, these forecasts exhibit significant out-of-sample predictability that ultimately translates into considerable utility gains in a mean-variance portfolio strategy.

KW - Predictive regressions

KW - Regime switching

KW - Return predictability

U2 - 10.1016/j.iref.2017.10.021

DO - 10.1016/j.iref.2017.10.021

M3 - Journal article

AN - SCOPUS:85034570123

VL - 56

SP - 138

EP - 160

JO - International Review of Economics and Finance

JF - International Review of Economics and Finance

SN - 1059-0560

ER -