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The University of Southampton
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Economics Part of Economic, Social and Political Science

Research project: Episodic Predictability in Models with Persistent Variable and Endogeneity: Detection and Estimation - Dormant

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The main objective of this research is to develop a technical toolkit for uncovering the ability of a given variable to predict future values of another one (for example, predicting GDP growth with interest rates, stock returns with valuation ratios, etc) when this potential predictability may switch on and off depending on external factors (such as the state of the economy).

Existing methods that ignore this switching feature together with other complications that characterise economic and financial data may lead to misleading inferences about predictability.

It is expected that this research will lead to more robust and reliable methods for detecting this form of ‘dynamic’ predictability and also to help uncover interesting phenomena and dynamic interactions between economic and financial variables which could not have been handled via traditional methods.

The 18 month project includes collaboration with other international researchers in the field of Econometrics.

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