Interpreting long-horizon estimates in predictive regressions
By: Erik Hjalmarsson.
Contributors: Board of Governors of the Federal Reserve System (U.S.)
Series: International finance discussion papers -- no. 928; International finance discussion papers (Online) -- no. 928.
Publisher: Federal Reserve Board
Published: 2008
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "This paper analyzes the asymptotic properties of long-horizon estimators under both the null hypothesis and an alternative of predictability.  Asymptotically, under the null of no predictability, the long-run estimator is an increasing deterministic function of the short-run estimate and the forecasting horizon.  Under the alternative of predictability, the conditional distribution of the long-run estimator, given the short-run estimate, is no longer degenerate and the expected pattern of coefficient estimates across horizons differs from that under the null.  Importantly, however, under the alternative, highly endogenous regressors, such as the dividend-price ratio, tend to deviate much less than exogenous regressors, such as the short interest rate, from the pattern expected under the null, making it more difficult to distinguish between the null and the alternative"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 4/28/2008.

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