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Book part
Publication date: 21 November 2014

Alex Maynard and Dongmeng Ren

We compare the finite sample power of short- and long-horizon tests in nonlinear predictive regression models of regime switching between bull and bear markets, allowing…

Abstract

We compare the finite sample power of short- and long-horizon tests in nonlinear predictive regression models of regime switching between bull and bear markets, allowing for time varying transition probabilities. As a point of reference, we also provide a similar comparison in a linear predictive regression model without regime switching. Overall, our results do not support the contention of higher power in longer horizon tests in either the linear or nonlinear regime switching models. Nonetheless, it is possible that other plausible nonlinear models provide stronger justification for long-horizon tests.

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Essays in Honor of Peter C. B. Phillips
Type: Book
ISBN: 978-1-78441-183-1

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Book part
Publication date: 21 November 2014

Abstract

Details

Essays in Honor of Peter C. B. Phillips
Type: Book
ISBN: 978-1-78441-183-1

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Book part
Publication date: 21 November 2014

Abstract

Details

Essays in Honor of Peter C. B. Phillips
Type: Book
ISBN: 978-1-78441-183-1

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