Out-of-Sample Predictability in International Equity Markets: A Model Selection Approach

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1540-6288.2009.00230.x Byline: Xiaojing Su (1), Tao Wang (2), Jian Yang (3) Keywords: international stock markets; model selection; economic criteria; nonparametric models; forecasting Abstract: Abstract For 13 major international stock markets, there is much evidence of out-of-sample predictability for growth stocks especially when evaluated with economic criteria, and to a noticeably lesser extent for general stock markets and value stocks. Our results shed light on the recent debate about stock return predictability, using different assets (growth-style indexes), forecasting variables (past returns), forecasting models (nonlinear models), and alternative forecasting evaluation criteria (economic criteria). Our analysis suggests that (growth) stock returns might be predictable. Author Affiliation: (1)Hong Kong Monetary Authority (2)Queens College and the Graduate Center of CUNY (3)University of Colorado Denver Article note: (*) Corresponding author: The Business School, PO Box 173364, University of Colorado Denver, Denver, CO 80217-3364; Phone: (303) 556-5852; E-mail: Jian.Yang@ucdenver.edu.