Self‐Similarity in Long‐Horizon Returns
In: Mathematical Finance, Band 30, Heft 4, S. 1368-1391
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In: Mathematical Finance, Band 30, Heft 4, S. 1368-1391
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In: The quarterly review of economics and finance, Band 53, Heft 2, S. 202-218
ISSN: 1062-9769
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In: The journal of financial research: the journal of the Southern Finance Association and the Southwestern Finance Association, Band 23, Heft 4, S. 523-544
ISSN: 1475-6803
AbstractIn this article we propose a new parsimonious state‐space model in which state variables characterize the stochastic movements of stock returns. Using the equally weighted and decile monthly stock returns, we show that (a) a parsimonious state‐space model characterizes the variation in expected returns at any horizon; (b) the extracted expected returns explain a substantial proportion of the variance in realized returns, and the magnitude of this proportion increases significantly with the horizon of returns; (c) the model successfully captures the empirical fact that returns of smaller firms have both stronger positive autocorrelations of short‐horizon returns and stronger negative autocorrelations of long‐horizon returns; and (d) the forecasts of asset returns obtained with the state‐space model subsume the information in other potential predictor variables such as dividend yields.JEL classification: G10, G12.
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In: Journal of Business Finance &; Accounting, 1996, vol. 23, pp. 93-106 https:;/;/;doi.org/;10.1111/;j.1468-5957.1996.tb00404.x
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In: SMU Cox School of Business Research Paper No. 23-06
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