Robust Block Bootstrap Panel Predictability Tests
(2019) In Econometric Reviews 38(9). p.1089-1107- Abstract
- 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... (More)
- 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. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/c53e22dd-fc35-4433-b22d-5e2d4e080702
- author
- Smeekes, Stephan and Westerlund, Joakim LU
- organization
- publishing date
- 2019
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Econometric Reviews
- volume
- 38
- issue
- 9
- pages
- 1089 - 1107
- publisher
- Taylor & Francis
- external identifiers
-
- scopus:85054429428
- ISSN
- 0747-4938
- DOI
- 10.1080/07474938.2018.1536102
- language
- English
- LU publication?
- yes
- id
- c53e22dd-fc35-4433-b22d-5e2d4e080702
- date added to LUP
- 2018-08-22 16:20:27
- date last changed
- 2022-04-02 01:36:47
@article{c53e22dd-fc35-4433-b22d-5e2d4e080702,
abstract = {{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.}},
author = {{Smeekes, Stephan and Westerlund, Joakim}},
issn = {{0747-4938}},
language = {{eng}},
number = {{9}},
pages = {{1089--1107}},
publisher = {{Taylor & Francis}},
series = {{Econometric Reviews}},
title = {{Robust Block Bootstrap Panel Predictability Tests}},
url = {{http://dx.doi.org/10.1080/07474938.2018.1536102}},
doi = {{10.1080/07474938.2018.1536102}},
volume = {{38}},
year = {{2019}},
}