PREDICTABILITY OF STOCK MARKET RETURNS

ISSUES:
 
This project focuses on building an econometric model that predicts returns on the stock markets (or other
financials asset markets).  Based on ‘economic theory’, this project would require a substantial amount of
econometrics and one of the main aims would be to look at the forecasting performance of the asset returns
within and out of sample.  The model should outperform simple alternative models, such as AR, VAR or other
statistical models and also comply with the standard econometrics requirements.   
The project could look at aggregated return data or sector returns and would also allow for a comparison
between different countries.  
 
SELECTED READING:
 
Lior Menzly, Tano Santos, Pietro Veronesi, (2004), “Understanding Predictability”,  Journal of Pol英语论文网 【http://www.51lunwen.org】itical
Economy, 112
 
Barberis and Thaler (2002), A Survey of Behavioral Finance. NBER Working Paper, September
 
Pesaran and Timmerman (1994), “Forecasting Stock Returns : An Examination of Stock Market Trading in
the Presence of Transaction Costs”, Journal of Forecasting, 13, 4, pp 335-367.   
 
Pesaran, M.H. and Timmermann, A., (1995), “Predictability of stock returns: robustness and economic
significance", Journal of Finance, 50,  pp 1201-1228.
 
Brennan, M. and Xia, Y. (2004), “Persistence, predictability and portfolio planning”, Preprint, UCLA, available
http://finance.wharton.upenn.edu/~yxia/
from
 
 
DATA SOURCE: CRSP, Datastream.
 
STOCK MARKET PREDICTABILITY AND SHORT TERMISM  
ISSUES:
 
Are stock prices excessively volatile or do they behave according to “some” economic hypothesis such as the
Gordon Growth Model (with time varying discount factors and dividend forecasts).
 
SELECTED READING:
 
Barber, B. and T. Odean (2002), “Do the Slow Die First?”, Review of Financial Studies, March 2002, Vol. 15,
No. 2, 455-487. 
 
Barber, B. and T. Odean (2002), “Does Online Trading Change Investor Behavior?”, European Business
Organization Law Review, 2002, Vol. 3, 83-128.  
Barber, B. and T. Odean (2001), "Boys will be Boys: Gender, Overconfidence, and Common Stock < 本文来自：英语论文网 【http://www.51lunwen.org】