Fractionally integrated autoregressive moving average (ARFIMA) and Heterogeneou Autoregressive (HAR) models are estimated and their ability to predict the one-trading-day-ahead CAC40 realized volatility is investigated. In particular, this paper follows three steps: (i) The optimal sampling...

Backtesting stock market investment strategies is fraught with danger – for example, overfitting. The signal to noise ratio in stock markets is so low that overfitting is inevitable. Simulation offers a means of assessing and compensating for the dangers. It is not obvious at first how...

We demonstrate that the parameters controlling skewness and kurtosis in popular equity return models estimated at daily frequency can be obtained almost as precisely as if volatility is observable by simply incorporating the strong information content of realized volatility measures extracted...

We investigate the direct connection between the uncertainty related to estimated stable ratios of stock prices and risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one. A simulation-based Bayesian procedure is introduced for...

In this paper we consider two cases of pairs trading strategies: a conditional statistical arbitrage method and an implicit statistical arbitrage method. We use a simulation-based Bayesian procedure for predicting stable ratios, defined in a cointegration model, of pairs of stock prices. We show...

We investigate the direct connection between the uncertainty related to estimated stable ratios of stock prices and risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one. A simulation-based Bayesian procedure is introduced for...

We decompose earnings yield into a smoothing component and a stationary residual component to isolate the fluctuations due to variation in expected returns from those due to the change in the forecast of dividend dynamics. The residual component forms a powerful predictor of dividend growth...

We present a novel approach to analyzing stock return predictability that accommodates (i) arbitrary predictor persistence, (ii) panels with common factors, (iii) multiple predictors, (iv) short- and long-horizon analysis, and relies on standard inference from least-squares estimation of a...

We construct a momentum factor that identifies cross-sectional winners and losers based on a weighting scheme that incorporates all the price data, over the entire lookback period, as opposed to only the first and last price points of the window. The weighting scheme is derived from the...