Feedback Trading and Predictability of Stock Returns in Germany, 1880?1913

I use a time-varying parameter model in order to study the predictability of monthly real stock returns in Germany over the period 1880?1913. I find that the extent to which returns were predictable underwent significant changes over time. Specifically, predictability of returns, as measured by their first-order autocorrelation coefficient, was positive most of the time. It tended to be significant during extended periods of stock market decline, but not during periods of stock market increase. I argue that this timepattern of predictability of returns is consistent with feedback effects of futures trading on the spot market.

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Year of publication:	2004
Authors:	Pierdzioch, Christian
Publisher:	Kiel : Kiel Institute for the World Economy (IfW)
Subject:	Börsenkurs \| Kapitalertrag \| Zeitreihenanalyse \| Schätzung \| Deutschland \| Stock market \| Return Predictability \| Germany

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Series:	Kiel Working Paper ; 1213
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	388195967 [GVK] hdl:10419/17763 [Handle] RePEc:zbw:ifwkwp:1213 [RePEc]
Classification:	G14 - Information and Market Efficiency; Event Studies ; N24 - Europe: 1913-
Source:	EconStor