We survey the recent literature on learning in financial markets. Our main theme is that many
financial market phenomena that appear puzzling at first sight are easier to understand once …

This paper reviews the literature on Bayesian portfolio analysis. Information about events,
macro conditions, asset pricing theories, and security-driving forces can serve as useful …

We survey the literature on stock return forecasting, highlighting the challenges faced by
forecasters as well as strategies for improving return forecasts. We focus on US equity …

Goyal and Welch argue that the historical average excess stock return forecasts future
excess stock returns better than regressions of excess returns on predictor variables. In this …

Household finance—the normative and positive study of how households use financial
markets to achieve their objectives—has gained a lot of attention over the past decade and …

Welch and Goyal (2008) find that numerous economic variables with in-sample predictive
ability for the equity premium fail to deliver consistent out-of-sample forecasting gains …

Why is the equity premium so high, and why are stocks so volatile? Why are stock returns in
excess of government bill rates predictable? This paper proposes an answer to these …

We present evidence on the term structure of the equity premium. We recover prices of
dividend strips, which are short-term assets that pay dividends on the stock index every …

We propose a new approach to imposing economic constraints on time series forecasts of
the equity premium. Economic constraints are used to modify the posterior distribution of the …

We develop a framework for estimating expected returns—a predictive system—that allows
predictors to be imperfectly correlated with the conditional expected return. When predictors …