NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Predictive Regressions

Robert F. Stambaugh

NBER Technical Working Paper No. 240
Issued in May 1999

When a rate of return is regressed on a lagged stochastic regressor, such as a dividend yield, the regression disturbance is correlated with the regressor's innovation. The OLS estimator's finite-sample properties, derived here, can depart substantially from the standard regression setting. Bayesian posterior distributions for the regression parameters are obtained under specifications that differ with respect to (i) prior beliefs about the autocorrelation of the regressor and (ii) whether the initial observation of the regressor is specified as fixed or stochastic. The posteriors differ across such specifications asset allocations in the presence of estimation risk exhibit sensitivity to those differences.

download in pdf format
   (2377 K)

email paper

This paper is available as PDF (2377 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/t0240

Published: Journal of Financial Economics, Vol. 54 (1999): 375-421.

Users who downloaded this paper also downloaded these:
Colle and Grossman w0240 Determinants of Pediatric Care Utilization
van Binsbergen and Koijen w16263 Predictive Regressions: A Present-value Approach
Cochrane w12026 The Dog That Did Not Bark: A Defense of Return Predictability
Campbell and Shiller w2511 Stock Prices, Earnings and Expected Dividends
Campbell w3246 A Variance Decomposition for Stock Returns
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us