Non-linear predictability of stock market returns: comparative evidence from Japan and the US

Peter Macmillan, Andreas Humpe

    Research output: Contribution to journalArticlepeer-review

    4 Citations (Scopus)

    Abstract

    Using smooth transition regression model analysis, we examine the non linear predictability of Japanese and US stock market returns by a set of macroeconomic variables between 1981 and 2006. The theoretical basis for investigating non-linear behaviour in stock returns can be based on the interaction between noise traders and arbitrageurs or behavioural finance theories of non-linear risk aversion. Our findings support differences in non-linearity of stock returns in Japan and the US that might be linked to different share-ownership of the Japanese stock market compared to the US.
    Original languageEnglish
    Number of pages38
    JournalInvestment Management and Financial Innovations
    Volume11
    Issue number4
    Publication statusPublished - 2014

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