Published in Journal of Economic Dynamics and Control (2023, 148, 104618).
Joint work with Nusret Cakici (FU), Christian Fieberg (CUAS), and Daniel Metko (UB).
Abstract: We examine return predictability with machine learning in 46 stock markets around the world. We calculate 148 firm characteristics and use them to feed a repertoire of different models. The algorithms extract predictability mainly from simple yet popular factor types—such as momentum, reversal, value, and size. All individual models generate substantial economic gains; however, combining them proves particularly effective. Despite the overall robustness, the machine learning performance depends heavily on firm size and availability of recent information. Furthermore, it varies internationally along two critical dimensions: the number of listed firms in the market and the average idiosyncratic risk limiting arbitrage.
Presentations: Technical University of Munich, Robeco, Ono Academic College, American University of Sharjah, American University in Dubai.