Joakim Westerlund
Professor, Programme director – Master of Data Analytics and Business Economics
Robust Block Bootstrap Panel Predictability Tests
Author
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