Forecasting stock returns with large dimensional factor models

被引:9
|
作者
Giovannelli, Alessandro [1 ]
Massacci, Daniele [2 ]
Soccorsi, Stefano [3 ]
机构
[1] Univ Aquila, Laquila, Italy
[2] Kings Coll London, London, England
[3] Univ Lancaster, Dept Econ, Management Sch, Lancaster, England
关键词
Stock returns forecasting; Factor model; Large data sets; Forecast evaluation; DYNAMIC-FACTOR MODEL; EQUITY PREMIUM PREDICTION; ACCURACY; NUMBER; TESTS; PREDICTABILITY; IDENTIFICATION; PERFORMANCE; ARBITRAGE; SELECTION;
D O I
10.1016/j.jempfin.2021.07.009
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
We study equity premium out-of-sample predictability by extracting the information contained in a high number of macroeconomic predictors via large dimensional factor models. We compare the well-known factor model with a static representation of the common components with the Generalized Dynamic Factor Model, which accounts for time series dependence in the common components. Using statistical and economic evaluation criteria, we empirically show that the Generalized Dynamic Factor Model helps predicting the equity premium. Exploiting the link between business cycle and return predictability, we find accurate predictions also by combining rolling and recursive forecasts in real-time.
引用
收藏
页码:252 / 269
页数:18
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