Researchers in finance very often rely on highly persistent – nearly integrated – explanatory variables to predict returns. However, statistical inference in predictive regressions depends critically upon the stochastic properties of the posited explanatory variable, and in particular, of...

The forecasting literature has identified three important and broad issues: the predictive content of explanatory variable is most of the times unstable over time, in-sample and out-of-sample results are often discordant and precise statistical inference with highly persistent predictors is...

We propose a new methodology for abnormal return detection and correction, and evaluate the economic impacts of outliers on asset allocations with higher-order moments (Cf. Jurczenko et al., 2008). Indeed, extreme returns and outliers greatly affect empirical higher-order moment estimations (Cf....