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Out-of-sample Performance (out-of-sample + performance)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting80%

Selected Abstracts

Passive Hedge Fund Replication , Beyond the Linear Case

EUROPEAN FINANCIAL MANAGEMENT, Issue 2 2010
Noël Amenc
G10 Abstract In this paper we extend,Hasanhodzic and Lo (2007),by assessing the out-of-sample performance of various non-linear and conditional hedge fund replication models. We find that going beyond the linear case does not necessarily enhance the replication power. On the other hand, we find that selecting factors on the basis on an economic analysis allows for a substantial improvement in out-of-sample replication quality, whatever the underlying form of the factor model. Overall, we confirm the findings in,Hasanhodzic and Lo (2007)that the performance of the replicating strategies is systematically inferior to that of the actual hedge funds. [source]

Non-linear interest rate dynamics and forecasting: evidence for US and Australian interest rates

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2009
David G. McMillan
Abstract Recent empirical finance research has suggested the potential for interest rate series to exhibit non-linear adjustment to equilibrium. This paper examines a variety of models designed to capture these effects and compares both their in-sample and out-of-sample performance with a linear alternative. Using short- and long-term interest rates we report evidence that a logistic smooth-transition error-correction model is able to best characterize the data and provide superior out-of-sample forecasts, especially for the short rate, over both linear and non-linear alternatives. This model suggests that market dynamics differ depending on whether the deviations from long-run equilibrium are above or below the threshold value. Copyright © 2007 John Wiley & Sons, Ltd. [source]

The Gilt-Equity Yield Ratio and the Predictability of UK and US Equity Returns

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 3-4 2000
Richard D.F. Harris
A number of financial variables have been shown to be effective in explaining the time-series of aggregate equity returns in both the UK and the US. These include, inter alia, the equity dividend yield, the spread between the yields on long and short government bonds, and the lagged equity return. Recently, however, the ratio between the long government bond yield and the equity dividend yield , the gilt-equity yield ratio , has emerged as a variable that has considerable explanatory power for UK equity returns. This paper compares the predictive ability of the gilt-equity yield ratio with these other variables for UK and US equity returns, providing evidence on both in-sample and out-of-sample performance. For UK monthly returns, it is shown that while the dividend yield has substantial in-sample explanatory power, this is not matched by out-of sample forecast accuracy. The gilt-equity yield ratio, in contrast, performs well both in-sample and out-of-sample. Although the predictability of US monthly equity returns is much lower than for the UK, a similar result emerges, with the gilt-equity yield ratio dominating the other variables in terms of both in-sample explanatory power and out-of-sample forecast performance. The gilt-equity yield ratio is also shown to have substantial predictive ability for long horizon returns. [source]

THE FUTURE TRAJECTORY OF U.S. CO2 EMISSIONS: THE ROLE OF STATE VS.

JOURNAL OF REGIONAL SCIENCE, Issue 1 2007
AGGREGATE INFORMATION
ABSTRACT This paper provides comparisons of a variety of time-series methods for short-run forecasts of the main greenhouse gas, carbon dioxide, for the United States, using a recently released state-level data set from 1960,2001. We test the out-of-sample performance of univariate and multivariate forecasting models by aggregating state-level forecasts versus forecasting the aggregate directly. We find evidence that forecasting the disaggregate series and accounting for spatial effects drastically improves forecasting performance under root mean squared forecast error loss. Based on the in-sample observations we attempt to explain the emergence of voluntary efforts by states to reduce greenhouse gas emissions. We find evidence that states with decreasing per capita emissions and a "greener" median voter are more likely to push toward voluntary cutbacks in emissions. [source]

Bankruptcy prediction using a discrete-time duration model incorporating temporal and macroeconomic dependencies

JOURNAL OF FORECASTING, Issue 6 2008
Chae Woo Nam
Abstract The purpose of this paper is to build an alternative method of bankruptcy prediction that accounts for some deficiencies in previous approaches that resulted in poor out-of-sample performances. Most of the traditional approaches suffer from restrictive presumptions and structural limitations and fail to reflect the panel properties of financial statements and/or the common macroeconomic influence. Extending the work of Shumway (2001), we present a duration model with time-varying covariates and a baseline hazard function incorporating macroeconomic dependencies. Using the proposed model, we investigate how the hazard rates of listed companies in the Korea Stock Exchange (KSE) are affected by changes in the macroeconomic environment and by time-varying covariate vectors that show unique financial characteristics of each company. We also investigate out-of-sample forecasting performances of the suggested model and demonstrate improvements produced by allowing temporal and macroeconomic dependencies.,,Copyright © 2008 John Wiley & Sons, Ltd. [source]