A Comprehensive Look at the Empirical Performance of Equity Premium Prediction

Posted: 8 Aug 2008

See all articles by Ivo Welch

Ivo Welch

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Amit Goyal

University of Lausanne; Swiss Finance Institute

Multiple version iconThere are 3 versions of this paper

Date Written: July 2008

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.

Keywords: G12, G14

Suggested Citation

Welch, Ivo and Goyal, Amit, A Comprehensive Look at the Empirical Performance of Equity Premium Prediction (July 2008). The Review of Financial Studies, Vol. 21, Issue 4, pp. 1455-1508, 2008. Available at SSRN: https://ssrn.com/abstract=1211941 or http://dx.doi.org/10.1093/rfs/hhm014

Ivo Welch (Contact Author)

University of California, Los Angeles (UCLA) ( email )

110 Westwood Plaza
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HOME PAGE: http://www.ivo-welch.info

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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Amit Goyal

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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