Related resources
Full-text held externally
- DOI: 10.1111/obes.12035
Search for item elsewhere
University researcher(s)
Academic department(s)
Does the Macroeconomy Predict UK Asset Returns in a Nonlinear Fashion? Comprehensive Out-of-Sample Evidence
Guidolin, M; Hyde, S.; McMillan, D.; Ono, S
Oxford Bulletin of Economics and Statistics. 2014;76:510-535.
Access to files
Full-text and supplementary files are not available from Manchester eScholar. Full-text is available externally using the following links:
Full-text held externally
- DOI: 10.1111/obes.12035
Abstract
We perform a comprehensive examination of the recursive, comparative predictive performance of linear and nonlinear models for UK stock and bond returns. We estimate Markov switching, threshold autoregressive (TAR) and smooth transition autoregressive (STR) regime switching models and a range of linear specifications including models with GARCH type specifications. Results demonstrate UK asset returns require nonlinear dynamics to be modelled with strong evidence in favour of Markov switching frameworks. Our results appear robust to the choice of sample period, changes in loss functions and to the methodology employed to test for equal predictive accuracy. The key findings extend to a similar sample of US data.