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An empirical analysis of real activity and stock returns in an emerging market

The present paper analyzes the role of stock market returns as a predictor of real output for a fast-growing emerging market, Malaysia. In the analysis, forecasting equations for 1-, 2-, 4-, and 8-quarter forecasting horizons based on autoregressive distributed lags framework are adopted. From the e...

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Main Author: Ibrahim, Mansor
Format: Article
Language:English
Published: Economic Society of Australia 2010
Online Access:http://psasir.upm.edu.my/id/eprint/13028/1/13028.pdf
http://psasir.upm.edu.my/id/eprint/13028/
http://www.sciencedirect.com/science/article/pii/S0313592610500286
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spelling my.upm.eprints.130282016-01-26T01:37:14Z http://psasir.upm.edu.my/id/eprint/13028/ An empirical analysis of real activity and stock returns in an emerging market Ibrahim, Mansor The present paper analyzes the role of stock market returns as a predictor of real output for a fast-growing emerging market, Malaysia. In the analysis, forecasting equations for 1-, 2-, 4-, and 8-quarter forecasting horizons based on autoregressive distributed lags framework are adopted. From the estimation, we find evidence that stock market returns do contain predictive ability at short-forecasting horizons, especially at less than 4-quarter horizons. Estimating the forecasting models recursively, we note reduction of out-of-sample forecasting evaluation statistics, namely the mean absolute errors (MAE) and the mean squared forecast errors (MSFE), from those obtained from the simple autoregressive (AR) model. More importantly, the null hypothesis of equal predictive accuracy between the model with stock returns as a predictor and the AR model is rejected for the 1-quarter and 2-quarter forecasting horizons by the McCraken’s (2007) out-of-sample-F statistics. Economic Society of Australia 2010-09 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/13028/1/13028.pdf Ibrahim, Mansor (2010) An empirical analysis of real activity and stock returns in an emerging market. Economic Analysis and Policy, 40 (2). pp. 263-271. ISSN 0313-5926 http://www.sciencedirect.com/science/article/pii/S0313592610500286 10.1016/S0313-5926(10)50028-6
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description The present paper analyzes the role of stock market returns as a predictor of real output for a fast-growing emerging market, Malaysia. In the analysis, forecasting equations for 1-, 2-, 4-, and 8-quarter forecasting horizons based on autoregressive distributed lags framework are adopted. From the estimation, we find evidence that stock market returns do contain predictive ability at short-forecasting horizons, especially at less than 4-quarter horizons. Estimating the forecasting models recursively, we note reduction of out-of-sample forecasting evaluation statistics, namely the mean absolute errors (MAE) and the mean squared forecast errors (MSFE), from those obtained from the simple autoregressive (AR) model. More importantly, the null hypothesis of equal predictive accuracy between the model with stock returns as a predictor and the AR model is rejected for the 1-quarter and 2-quarter forecasting horizons by the McCraken’s (2007) out-of-sample-F statistics.
format Article
author Ibrahim, Mansor
spellingShingle Ibrahim, Mansor
An empirical analysis of real activity and stock returns in an emerging market
author_facet Ibrahim, Mansor
author_sort Ibrahim, Mansor
title An empirical analysis of real activity and stock returns in an emerging market
title_short An empirical analysis of real activity and stock returns in an emerging market
title_full An empirical analysis of real activity and stock returns in an emerging market
title_fullStr An empirical analysis of real activity and stock returns in an emerging market
title_full_unstemmed An empirical analysis of real activity and stock returns in an emerging market
title_sort empirical analysis of real activity and stock returns in an emerging market
publisher Economic Society of Australia
publishDate 2010
url http://psasir.upm.edu.my/id/eprint/13028/1/13028.pdf
http://psasir.upm.edu.my/id/eprint/13028/
http://www.sciencedirect.com/science/article/pii/S0313592610500286
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score 13.211869

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