TY  - JOUR
AU  - Campbell, John Y
TI  - Why Long Horizons: A Study of Power Against Persistent Alternatives
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 142
PY  - 1993
Y2  - September 1993
DO  - 10.3386/t0142
UR  - http://www.nber.org/papers/t0142
L1  - http://www.nber.org/papers/t0142.pdf
N1  - Author contact info:
John Y. Campbell
Morton L. and Carole S.
Olshan Professor of Economics
Department of Economics
Harvard University
Littauer Center 213
Cambridge, MA 02138
Tel: 617/496-6448
Fax: 617/495-7730
E-Mail: john_campbell@harvard.edu
AB  - This paper studies tests of predictability in regressions with a given AR(1) regressor and an asset return dependent variable measured over a short or long horizon.  The paper shows that when there is a persistent predictable component in the return, an increase in the horizon may increase the R2 statistic of the regression and the approximate slope of a predictability test.  Mone Carlo experiments show that long-horizon regression tests have serious size distortions when asymptotic critical values are used, but some versions of such tests have power advantages remaining after size is corrected.
ER  -