Year: 2017
Author: Mitianoudis, Nikolaos, Dergiades, Theologos
Credit and Capital Markets – Kredit und Kapital, Vol. 50 (2017), Iss. 1 : pp. 37–61
Abstract
Accepting non-linearities as an endemic feature of financial data, this paper re-examines Cochrane"s „new fact in finance" hypothesis (Cochrane, Economic Perspectives-FRB of Chicago 23, 36–58, 1999). By implementing two methods, frequently encountered in digital signal processing analysis, (Undecimated Wavelet Transform and Empirical Mode Decomposition both methods extract components in the time-frequency domain), we decompose the real stock prices and the real dividends, for the US economy, into signals that correspond to distinctive frequency bands. Armed with the decomposed signals and acting within a non-linear framework, the predictability of stock prices through the use of dividends is assessed at alternative horizons. It is shown that the „new fact in finance" hypothesis is a valid proposition, provided that dividends contribute significantly to predicting stock prices at horizons spanning beyond 32 months. The identified predictability is entirely non-linear in nature.
Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.3790/ccm.50.1.37
Credit and Capital Markets – Kredit und Kapital, Vol. 50 (2017), Iss. 1 : pp. 37–61
Published online: 2017-03
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 25
Keywords: G10 C14 C22 C29 Stock prices and dividends Time-frequency decomposition
Author Details
| Section Title | Page | Action | Price |
|---|---|---|---|
| Nikolaos Mitianoudis / Theologos Dergiades: Stock Prices Predictability at Long-horizons: Two Tales from the Time-Frequency Domain | 1 |