Four Centuries of Return Predictability

66 Pages Posted: 5 Jan 2015 Last revised: 17 May 2023

See all articles by Benjamin Golez

Benjamin Golez

University of Notre Dame

Peter Koudijs

Erasmus University Rotterdam

Multiple version iconThere are 2 versions of this paper

Date Written: December 2014


We combine annual stock market data for the most important equity markets of the last four centuries: the Netherlands/U.K. (1629-1812), U.K. (1813-1870) and U.S. (1871-2015). We show that dividend yields are stationary and consistently forecast returns. The documented predictability holds for annual and multi-annual horizons and works both in and out-of-sample, providing strong evidence that expected returns in stock markets are time-varying. Much of this variation is related to the business cycle, with expected returns increasing in recessions. We also find that, except for the period after 1945, dividend yields predict dividend growth rates.

Suggested Citation

Golez, Benjamin and Koudijs, Peter, Four Centuries of Return Predictability (December 2014). NBER Working Paper No. w20814, Available at SSRN:

Benjamin Golez (Contact Author)

University of Notre Dame ( email )

256 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-1458 (Phone)


Peter Koudijs

Erasmus University Rotterdam ( email )

Burgemeester Oudlaan 50
Rotterdam, 3062PA


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