Combining Equity Premium Forecasts

17 Pages Posted: 22 Oct 2010

See all articles by Mark C. Freeman

Mark C. Freeman

University of Bradford - School of Management

Ben Groom

London School of Economics & Political Science (LSE)

Date Written: October 21, 2010

Abstract

In this paper, we provide techniques for combining different experts' opinions of the forward looking equity premium to resolve questions about the future value of an equity index tracker fund. By exploiting the fact that the survey data is approximately gamma distributed, we either use numerical methods or derive closed form solutions depending on the exact question posed. The practical significance of our results is shown to be highly sensitive to assumptions about the independence of each individual forecast.

Keywords: Equity Premium, Survey Data, Gamma Distribution, Unbiased Future Value

JEL Classification: G11

Suggested Citation

Freeman, Mark C. and Groom, Ben, Combining Equity Premium Forecasts (October 21, 2010). Available at SSRN: https://ssrn.com/abstract=1695588 or http://dx.doi.org/10.2139/ssrn.1695588

Mark C. Freeman (Contact Author)

University of Bradford - School of Management ( email )

Emm Lane
Bradford, West Yorkshire Bd9 4JL
United Kingdom
+44 (0)1274 234363 (Phone)
+44 (0)1274 546866 (Fax)

HOME PAGE: http://www.manag.brad.ac.uk/people/people.php?name=mcfreema

Ben Groom

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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