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Joakim Westerlund. Photo.

Joakim Westerlund

Professor, Programme director – Master of Data Analytics and Business Economics

Joakim Westerlund. Photo.

Robust Block Bootstrap Panel Predictability Tests

Author

  • Stephan Smeekes
  • Joakim Westerlund

Summary, in English

This article develops two block bootstrap-based panel predictability test procedures that are valid under very general conditions. Some of the allowable features include cross-sectional dependence, heterogeneous predictive slopes, persistent predictors, and complex error dynamics, including cross-unit endogeneity. While the first test procedure tests if there is any predictability at all, the second procedure determines the units for which predictability holds in case of a rejection by the first. A weak unit root framework is adopted to allow persistent predictors, and a novel theory is developed to establish asymptotic validity of the proposed bootstrap. Simulations are used to evaluate the performance of our tests in small samples, and their implementation is illustrated through an empirical application to stock returns.

Department/s

  • Department of Economics

Publishing year

2019

Language

English

Pages

1089-1107

Publication/Series

Econometric Reviews

Volume

38

Issue

9

Document type

Journal article

Publisher

Taylor & Francis

Topic

  • Economics

Status

Published

ISBN/ISSN/Other

  • ISSN: 0747-4938