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squared return prediction errors gives an adequate approximation of the unobserved realised conditional variance for both the …
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extensive simulation study and out-of-sample prediction exercise and find large improvements both in model selection and … prediction compared to alternative selection methods. Our proposed method has higher out-of-sample Sharpe ratios and explanatory …
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We propose a nonparametric method to test which characteristics provide independent information for the cross section of expected returns. We use the adaptive group LASSO to select characteristics and to estimate how they affect expected returns nonparametrically. Our method can handle a large...
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