This paper provides a robust test of predictability under the predictive regression model with possible heavy-tailed innovations assumption,in which the predictive variable is persistent and its innovations are highly...This paper provides a robust test of predictability under the predictive regression model with possible heavy-tailed innovations assumption,in which the predictive variable is persistent and its innovations are highly correlated with returns.To this end,we propose a robust test which can capture empirical phenomena such as heavy tails,stationary,and local to unity.Moreover,we develop related asymptotic results without the second-moment assumption between the predictive variable and returns.To make the proposed test reasonable,we propose a generalized correlation and provide theoretical support.To illustrate the applicability of the test,we perform a simulation study for the impact of heavy-tailed innovations on predictability,as well as direct and/or indirect implementation of heavy-tailed innovations to predictability via the unit root phenomenon.Finally,we provide an empirical study for further illustration,to which the proposed test is applied to a U.S.equity data set.展开更多
基金The research of WONG Hsin-Chieh is partially supported by the NSTC(111-2118-M-305-004-MY2)the research of PANG Tian-xiao is partially supported by the National Social Science Foundation of China(21BTJ067)。
文摘This paper provides a robust test of predictability under the predictive regression model with possible heavy-tailed innovations assumption,in which the predictive variable is persistent and its innovations are highly correlated with returns.To this end,we propose a robust test which can capture empirical phenomena such as heavy tails,stationary,and local to unity.Moreover,we develop related asymptotic results without the second-moment assumption between the predictive variable and returns.To make the proposed test reasonable,we propose a generalized correlation and provide theoretical support.To illustrate the applicability of the test,we perform a simulation study for the impact of heavy-tailed innovations on predictability,as well as direct and/or indirect implementation of heavy-tailed innovations to predictability via the unit root phenomenon.Finally,we provide an empirical study for further illustration,to which the proposed test is applied to a U.S.equity data set.
