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Asymmetric adjustment of stock prices to their fundamental value and the predictability of US stock returns

Author

Listed:
  • Christophe Boucher

    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique)

Abstract

Using momentum threshold autoregressive (MTAR) models, we explore the adjustment mechanism between US stock prices and fundamentals. Next, we derive non-linear error-correction models and examine whether they can improve forecasts of stock returns. Results support MTAR model only for data at annual frequency.

Suggested Citation

  • Christophe Boucher, 2007. "Asymmetric adjustment of stock prices to their fundamental value and the predictability of US stock returns," Post-Print hal-00267994, HAL.
    • Handle: RePEc:hal:journl:hal-00267994
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    Cited by:

    1. Theologos Dergiades & Panos K. Pouliasis, 2023. "Should stock returns predictability be ‘hooked on’ long‐horizon regressions?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 718-732, January.
    2. Johnson, Carrie Lu, 2014. "Analysis of Commodity Market Integration In the Uganda Maize Market," Master's Theses and Plan B Papers 196707, University of Minnesota, Department of Applied Economics.
    3. Adämmer, Philipp & Bohl, Martin T., 2015. "Speculative bubbles in agricultural prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 67-76.
    4. Velinov, Anton & Chen, Wenjuan, 2015. "Do stock prices reflect their fundamentals? New evidence in the aftermath of the financial crisis," Journal of Economics and Business, Elsevier, vol. 80(C), pages 1-20.
    5. Abdul RASHID & Aamir JAVED & Zainab JEHAN & Uzma IQBAL, 2022. "Time-Varying Impacts of Macroeconomic Variables on Stock Market Returns and Volatility : Evidence from Pakistan," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 144-166, October.
    6. R. Gopinathan & S. Raja Sethu Durai, 2019. "Stock market and macroeconomic variables: new evidence from India," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-17, December.

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