Neslihanoglu, S., Sogiakas, V., McColl, J. and Lee, D. (2017) Nonlinearities in the CAPM: evidence from developed and emerging markets. Journal of Forecasting, 36(8), pp. 867-897. (doi: 10.1002/for.2389)
|
Text
113217.pdf - Accepted Version 996kB |
Abstract
This paper examines the forecasting ability of the non-linear specifications of the market model. We propose a conditional Two-moment market model with a time-varying systematic covariance (beta) risk in the form of a mean reverting process of the state space model via Kalman Filter algorithm. In addition, we account for the systematic component of co-skewness and co-kurtosis by considering higher moments. The analysis is implemented using data from the stock indices of several developed and emerging stock markets. The empirical findings favour the time-varying market model approaches which outperform linear model specifications, both in terms of model fit and predictability. Precisely, higher moments are necessary for datasets which involve structural changes and/or market inefficiencies which are common in most of the emerging stock markets.
Item Type: | Articles |
---|---|
Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Neslihanoglu, Mr Serdar and McColl, Professor John and Lee, Professor Duncan and Sogiakas, Dr Vasilios |
Authors: | Neslihanoglu, S., Sogiakas, V., McColl, J., and Lee, D. |
College/School: | College of Science and Engineering > School of Mathematics and Statistics > Statistics College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | Journal of Forecasting |
Publisher: | Wiley |
ISSN: | 0277-6693 |
ISSN (Online): | 1872-8200 |
Published Online: | 25 January 2016 |
Copyright Holders: | Copyright © 2016 John Wiley and Sons, Ltd. |
First Published: | First published in Journal of Forecasting 36(8):867-897 |
Publisher Policy: | Reproduced in accordance with the copyright policy of the publisher. |
University Staff: Request a correction | Enlighten Editors: Update this record