Thu, 21 Aug 2008 05:28:27 BST CiteULike: pdlug's Jacobsen http://www.citeulike.org/user/pdlug/author/Jacobsen CiteULike.org en-gb Copyright © 2004-2008 citeulike.org http://www.citeulike.org/user/pdlug/article/2567999 <i>Social Science Research Network Working Paper Series (November 2007)</i><br /><br />We revisit Kendall's (1953) conclusion that "the interval of observation may be very important" for stock market return predictability tests. Researchers to date mostly ignore this conclusion and routinely regress monthly observations on monthly observations. This is surprising because information aggregation should not take too long in near-efficient markets. Therefore the current practice of predicting stock returns using monthly observations may overlook short-term predictability. We show how conclusions regarding return predictability vary drastically when intervals of observation vary. If Kendall's famous "Demon of Chance" had handed him slightly different intervals of observation, Kendall might have concluded that stock returns were predictable. The Interval of Observation BEN Jacobsen Ben Marshall Nuttawat Visaltanachoti Social Science Research Network Working Paper Series (November 2007) 2008-03-20T20:14:54-00:00 2007 Social Science Research Network Working Paper Series data economics finance market observation returns sampling time