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Non-Stationary Parametric Single-Index Predictive Models: Simulation and Empirical Studies

In: Essays in Honor of Joon Y. Park: Econometric Theory

Author

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  • Ying Zhou
  • Hsein Kew
  • Jiti Gao

Abstract

This chapter considers the estimation of a parametric single-index predictive regression model with integrated predictors. This model can handle a wide variety of non-linear relationships between the regressand and the single-index component containing either the cointegrated predictors or the non-cointegrated predictors. The authors introduce a new estimation procedure for the model and investigate its finite sample properties via Monte Carlo simulations. This model is then used to examine stock return predictability via various combinations of integrated lagged economic and financial variables.

Suggested Citation

  • Ying Zhou & Hsein Kew & Jiti Gao, 2023. "Non-Stationary Parametric Single-Index Predictive Models: Simulation and Empirical Studies," Advances in Econometrics, in: Essays in Honor of Joon Y. Park: Econometric Theory, volume 45, pages 349-365, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aecozz:s0731-90532023000045a012
    DOI: 10.1108/S0731-90532023000045A012
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    More about this item

    Keywords

    Non-linearity; non-stationarity; single-index models; stock return predictability; cointegration; constrained least squares estimator; C13; C14; C32; C51;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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