Asymmetric adjustment of stock prices to their fundamental value and the predictability of US stock returns

Christophe BOUCHER

Using momentum threshold autoregressive (MTAR) models, we explore the adjustment mechanism between US stock prices and fundamentals. Next, we derive non-linear error-correction models and examine whether they can improve forecasts of stock returns. Results support MTAR model only for data at annual frequency.

Publication type: 
Scientific Article
Date de parution: 
Economics Letter