Schotman, Peter C. and Tschernig, Rolf and Budek, Jan (2008) Long memory and the term structure of risk. JOURNAL OF FINANCIAL ECONOMETRICS, 6 (4). pp. 459-495. ISSN 1479-8409,
Full text not available from this repository. (Request a copy)Abstract
This paper explores the implications of asset return predictability for long-term portfolio choice when return-forecasting variables are fractionally integrated. For important predictor variables, like the dividend-price ratio, and nominal and real interest rates, we estimate orders of integration around 0.8. This leads to substantial increases of the estimated long-term risk of stocks, bonds, and cash compared to estimates obtained from a stationary VAR. Results are sensitive to the inclusion of the short-term nominal interest rate in the prediction equation of excess stock returns. Jointly with the dividend-price ratio it has significant predictive power, but contrary to the dividend-price ratio the nominal interest rate does not induce mitigating effects through mean reversion.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | STOCK RETURN PREDICTABILITY; FRACTIONAL-INTEGRATION; VARIANCE DECOMPOSITION; RATIONAL BUBBLES; ASSET ALLOCATION; INTEREST-RATES; MODEL; PRICES; UNCERTAINTY; INFLATION; long-term portfolio choice; linear processes with fractional integration; term structure of risk |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Volkswirtschaftslehre und Ökonometrie Business, Economics and Information Systems > Institut für Volkswirtschaftslehre und Ökonometrie > Lehrstuhl für Ökonometrie (Prof. Dr. Rolf Tschernig) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 26 Oct 2020 08:13 |
| Last Modified: | 26 Oct 2020 08:13 |
| URI: | https://pred.uni-regensburg.de/id/eprint/30387 |
Actions (login required)
 |
View Item |
