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Monday, May 18, 2020 | History

4 edition of Predicting the equity premium out of sample found in the catalog.

Predicting the equity premium out of sample

John Y. Campbell

Predicting the equity premium out of sample

can anything beat the historical average?

by John Y. Campbell

  • 152 Want to read
  • 19 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Places:
  • United States
    • Subjects:
    • Stocks -- Prices -- United States -- History -- 20th century.

    • Edition Notes

      StatementJohn Y. Campbell, Samuel B. Thompson.
      SeriesNBER working paper series ;, working paper 11468, Working paper series (National Bureau of Economic Research : Online) ;, working paper no. 11468.
      ContributionsThompson, Samuel B., National Bureau of Economic Research.
      Classifications
      LC ClassificationsHB1
      The Physical Object
      FormatElectronic resource
      ID Numbers
      Open LibraryOL3478339M
      LC Control Number2005618351

      Get this from a library! Predicting the Equity Premium Out of Sample: Can Anything Beat the Historical Average?.. [John Y Campbell; Samuel B Thompson; National Bureau of Economic Research.] -- Abstract: A number of variables are correlated with subsequent returns on the aggregate US stock market in the 20th Century. Some of these variables are stock market . A Quantile Regression Approach to Equity Premium Prediction Loukia Meligkotsidoua, Ekaterini Panopouloub, Ioannis sc, Spyridon D. Vrontosb aDepartment of Mathematics, University of Athens, Athens, Greece bDepartment of Statistics and Insurance Science, University of Piraeus, Piraeus, Greece cDepartment of Statistics, Athens University of Economics and .

      In sum, earlier work that extensively studies equity premium predictability demonstrates only weak or even nonexistent out-of-sample predictability, especially in the period after the discovery of the macro variables. In this paper, we show that a focus on the equity premium fails to deliver evidence of predictability at the stock level. Accordingly, Predicting the Markets is chock-full of important lessons not only for institutional investors but also for individual investors, as well as business professionals and students. When it comes to predicting the global economy and financial markets, Dr. Ed has literally written the book/5(81).

      of international equity () provides evidence of a weak out{of-sample performance of the variance risk premium for S&P excess en et al.(, ) show that the correlation risk premium predicts S&P excess returns, whereas Cosemans() points out that the correlation risk premium and the systematic part ofFile Size: KB. A Comprehensive Study to Out-of Sample Equity Premium Prediction Cindy S.H. Wang y Shui Ki Wan yy Fang-I Liao yyy Abstract This paper approaches an old question in a comprehensive way from the econome-.


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Predicting the equity premium out of sample by John Y. Campbell Download PDF EPUB FB2

Predicting the Equity Premium Out of Sample: Can Anything Beat the Historical Average. John Y. Campbell, Samuel B. Thompson. NBER Working Paper No. Issued in July NBER Program(s):Asset Pricing.

A number of variables are correlated with subsequent returns on the aggregate US stock market in the 20th Century. Table premium prediction. The table displays the out-of-sample R oos 2 as a percentage for predictive models of the monthly equity premium against the null of the historical mean.

The R oos 2 is for models that impose a sign constraint on the slope coefficients and a positivity constraint on the forecasts. The out-of-sample monthly forecasts are obtained using a year Cited by:   Campbell, John Y. and Thompson, Samuel Brodsky, Predicting the Equity Premium Out of Sample: Can Anything Beat the Historical Average.

(July ). Harvard Institute of Economic Research Discussion Paper No. Cited by: Downloadable. A number of variables are correlated with subsequent returns on the aggregate US stock market in the 20th Century.

Some of these variables are stock market valuation ratios, others reflect patterns in corporate finance or the levels of short- and long-term interest rates. Amit Goyal and Ivo Welch () have argued that in-sample correlations conceal a systematic.

Predicting the Equity Premium Out of Sample: Can Anything Beat the Historical Average. Article in SSRN Electronic Journal 21() January with 93 Reads How we measure 'reads'. We first consider in-sample predictive performance using monthly data to predict 1, 3, 6, and 12 months ahead equity risk premium.

We find that in-sample results are significant under most forward periods, even after controlling for the variance risk premium. We also examine the out-of-sample prediction of the : Charles Cao, Timothy Simin, Han Xiao. With no restrictions, as we noted above, only earnings-based valuation ratios have a positive out-of-sample R 2, but the slope restriction delivers a positive out-of-sample R 2 for the dividend yield and the sign restriction brings the out-of-sample R 2 close to zero for the book Cited by: Predicting the Equity Premium Out of Sample: Can Anything Beat the Historical Average.

John Y. Campbell and Samuel B. Thompson 1 First draft: October 8, Thisversion:April1, 1Department of Economics, Littauer Center, Harvard University, Cambridge MAUSA, and NBER. Email [email protected] and [email protected] We are. sumed equity premium forecasting ability was a mirage, apparent even before the s.

Despite good in-sample predictive ability for annual equity pre-mia prior to§4 shows that dividend ratios had poor out-of-sample forecasting ability even then. Our diagnostic illustrates over what time periods one might imagine finding predictive.

I, although book equity does not become available untilwhich means that the book-to-market ratio begins then and the ten-year smoothed ROE begins in All data series continue to the end of The second column reports the date at which we begin the out-of-sample forecast evaluation.

This is the beginning of ture are unable to deliver consistently superior out-of-sample forecasts of the U.S. equity premium relative to a simple forecast based on the historical average (constant expected equity premium model).

They argue that individual predictive regression models thus fail to pass an important di-File Size: KB. Out-of-Sample Equity Premium Prediction: Economic Fundamentals vs. Moving-Average Rules Abstract This paper analyzes the ability of both economic variables and moving-average rules to forecast the monthly U.S.

equity premium using out-of-sample tests for – Both. For example, Bossaerts and Hillion () fail to find significant evidence of out-of-sample predictive ability in a collection of industrialized countries for a number of variables for –, and Goyal and Welch find that the dividend–price ratio is not a robust out-of-sample predictor of the U.S.

equity premium. 3 The lack of Cited by: This paper evaluates the ability of dividend ratios to predict the equity premium. We conduct an in and out-of-sample comparative study and apply the.

A Comprehensive Look at The Empirical Performance of Equity Premium Prediction regressors, and encompassing model forecasts. Section 7 reviews earlier literature.

Section 8 concludes. Data Sources and Data Construction Our dependent variable. Our paper suggests a simple, recursive residuals (out-of-sample) graphical approach to evaluating the predictive power of popular equity premium and stock market time-series forecasting regressions.

When applied, we find that dividend ratios should have been known to have no predictive ability even prior to the s, and that any seeming Cited by: the aggregate equity premium at return horizons well beyond one week.

We first consider the in-sample predictive power of the in comparison to other conventioIVS nal variables investigated in Goyal and Welch (). We regress the equity premium on individual the lagged predictors for 1, 3, 6, and month return horizons.

equity premium. This is found using the graphical diagnostic and conventional in-sample and out-of-sample tests. In particular the graphical diagnostic highlights the period from the late s onward as highly predictable. Moreover, with the purpose of delving deeper into our main predictive variable, the dividend ratio, we employ the.

PREDICTING THE EQUITY PREMIUM OUT OF SAMPLE: CAN ANYTHING BEAT THE HISTORICAL AVERAGE. John Y. Campbell Samuel B. Thompson Working Paper smoothed earnings price ratio, and book to market ratio.

Each of these ratios has some accounting measure of corporate value in the numerator, and market value in the Cited by: Get this from a library. Predicting the equity premium out of sample: can anything beat the historical average?.

[John Y Campbell; Samuel B Thompson; National. Downloadable! Economists have suggested a whole range of variables that predict the equity premium: dividend price ratios, dividend yields, earnings-price ratios, dividend payout ratios, corporate or net issuing ratios, book-market ratios, beta premia, interest rates (in various guises), and consumption-based macroeconomic ratios (cay).

Our paper comprehensively reexamines .Out-of-sample equity premium prediction: A complete subset quantile regression approach Loukia Meligkotsidoua, Ekaterini Panopouloub, Ioannis sc, Spyridon D.

Vrontosd aDepartment of Mathematics, University of Athens, Greece bKent Business School, University of Kent, Canterbury, United Kingdom cDepartment of Statistics, Athens University of Economics and .Out-of-sample R square (benchmark: random walk) AUD CAD CHF EUR GBP JPY NOK NZD SEK Efficient "Kitchen sink" File Size: 2MB.