We enhance the theory of asymptotic inference about predictive ability by considering the case when a set of variables used to construct predictions is sizable. To this end, we consider an alternative asymptotic framework where the number of predictors tends to infinity with the sample size,...

In this paper, we study the effectiveness of carry trade strategies during and after the financial crisis using a flexible approach to modeling currency returns. We decompose the currency returns into multiplicative sign and absolute return components, which exhibit much greater predictability...

We present a simple approach to forecasting conditional probability distributions of asset returns. We work with a parsimonious specification of ordered binary choice regression that imposes a connection on sign predictability across different quantiles. The model forecasts the future...