Publication Type
Journal Article
Version
submittedVersion
Publication Date
10-2007
Abstract
Recent theoretical work has revealed a direct connection between asset return volatility forecastability and asset return sign forecastability. This suggests that the pervasive volatility forecastability in equity returns could, via induced sign forecastability, be used to produce direction-of change forecasts useful for market timing. We attempt to do so in an international sample of developed equity markets, with some success, as assessed by formal probability forecast scoring rules such as the Brier score. An important ingredient is our conditioning not only on conditional mean and variance information, but also conditional skewness and kurtosis information, when forming direction-of-change forecasts.
Discipline
Econometrics | Finance
Research Areas
Econometrics
Publication
Journal of Financial Forecasting
Volume
1
Issue
2
First Page
1
Last Page
22
ISSN
1753-9552
Identifier
10.2139/ssrn.908317
Publisher
Risk Journals
Citation
Christoffersen, Peter F.; Diebold, Francis X.; Mariano, Roberto S.; Tay, Anthony S.; and Tse, Yiu Kuen.
Direction-of-change forecasts based on conditional variance, skewness and kurtosis dynamics: International evidence. (2007). Journal of Financial Forecasting. 1, (2), 1-22.
Available at: https://ink.library.smu.edu.sg/soe_research/538
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://www.sas.upenn.edu/~fdiebold/papers/paper73/CDMTT.pdf