Author : Stanislav Anatolyev
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Forecasting Dynamic Return Distributions Based on Ordered Binary Choice by : Stanislav Anatolyev
Download or read book Forecasting Dynamic Return Distributions Based on Ordered Binary Choice written by Stanislav Anatolyev and published by . This book was released on 2019 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a simple approach to forecasting conditional probability distributions of asset returns. We work with a parsimonious specification of ordered binary choice regression that imposes a connection on sign predictability across different quantiles. The model forecasts the future conditional probability distributions of returns quite precisely when using a past indicator and past volatility proxy as predictors. Direct benefits of the model are revealed in an empirical application to the 29 most liquid U.S. stocks. The forecast probability distribution is translated to significant economic gains in a simple trading strategy. Our approach can also be useful in many other applications where conditional distribution forecasts are desired.