Publication Type
Working Paper
Version
publishedVersion
Publication Date
7-2007
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.
Keywords
Volatility, variance, skewness, kurtosis, market timing, asset management, asset allocation, portfolio management
Discipline
Econometrics | Finance
Research Areas
Econometrics
First Page
1
Last Page
31
Publisher
SMU Economics and Statistics Working Paper Series, Paper No. 15-2007
City or Country
Singapore
Citation
Christoffersen, Peter F.; Diebold, Francis X.; Mariano, Robert S.; Tay, Anthony S.; and Tse, Yiu Kuen.
Direction-of-change forecasts for Asian equity markets based on conditional variance, skewness and Kurtosis dynamics: International evidence. (2007). 1-31.
Available at: https://ink.library.smu.edu.sg/soe_research/874
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.