Why Long Horizons? A Study of Power Against Persistent Alternatives
| Title: | Why Long Horizons? A Study of Power Against Persistent Alternatives |
| Author: | Campbell, John |
| Citation: | Campbell, John Y. 2001. Why long horizons? A study of power against persistent alternatives. Journal of Empirical Finance 8, no. 5: 459-491. |
| Full Text & Related Files: |
campbellnber_longhorizons.pdf (1.426Mb; PDF) 
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| Abstract: | This paper studies tests of predictability in regressions with a given AR(1) regressor and an asset return dependent variable measured over a short or long horizon. The paper shows that when there is a persistent predictable component in the return, an increase in the horizon may increase the R2 statistic of the regression and the approximate slope of a predictability test. Monte Carlo experiments show that long-horizon regression tests have serious size distortions when asymptotic critical values are used, but some versions of such tests have power advantages remaining after size is corrected. |
| Published Version: | http://dx.doi.org/10.1016/S0927-5398(01)00037-8 |
| Terms of Use: | This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA |
| Citable link to this page: | http://nrs.harvard.edu/urn-3:HUL.InstRepos:3196341 |
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