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Pockets of Predictability: A Replication
Farmer, Schmidt, and Timmermann (FST) document time-variation in market return predictability, identifying “pockets” of significant predictability through kernel regressions. However, our analysis reveals a critical discrepancy between the method outlined by FST and the code actually implemented. Instead of using a one-sided kernel, which guarantees out-of-sample forecasts, they perform in-sample estimation with a two-sided kernel. As a result, future information leaks into the forecasting model, undermining its reliability. Rectifying this error qualitatively alters the findings, invalidating most conclusions of the FST study. Thus, attempts to exploit such “pockets”—should they exist—offer little help in forecasting market returns.
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| TJF8006 | PSB lt.2 - Karya Akhir (Majalah) | 1 |
| Penerbit | United States: American Finance Association 2025 |
|---|---|
| Edisi | Vol. 80 Issue 6, Dec 2025 |
| Subjek | Farmer, Schmidt, and Timmermann (FST) Market return predictability Pockets Forecasting market returns |
| ISBN/ISSN | 1540-6261 |
| Klasifikasi | NONE |
| Deskripsi Fisik | 20 p. |
| Info Detail Spesifik | The Journal of Finance |
| Other Version/Related | Tidak tersedia versi lain |
| Lampiran Berkas |