A comprehensive look at the empirical performance of equity premium prediction
Our article comprehensively reexamines the performance of variables that have been
suggested by the academic literature to be good predictors of the equity premium. We find
that by and large, these models have predicted poorly both in-sample (IS) and out-of-sample
(OOS) for 30 years now; these models seem unstable, as diagnosed by their out-of-sample
predictions and other statistics; and these models would not have helped an investor with
access only to available information to profitably time the market.
suggested by the academic literature to be good predictors of the equity premium. We find
that by and large, these models have predicted poorly both in-sample (IS) and out-of-sample
(OOS) for 30 years now; these models seem unstable, as diagnosed by their out-of-sample
predictions and other statistics; and these models would not have helped an investor with
access only to available information to profitably time the market.
Abstract
Our article comprehensively reexamines the performance of variables that have been suggested by the academic literature to be good predictors of the equity premium. We find that by and large, these models have predicted poorly both in-sample (IS) and out-of-sample (OOS) for 30 years now; these models seem unstable, as diagnosed by their out-of-sample predictions and other statistics; and these models would not have helped an investor with access only to available information to profitably time the market.
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