A Comprehensive 2022 Look at the Empirical Performance of Equity Premium Prediction

Abstract

Our paper reexamines whether 29 variables from 26 papers published after Goyal and Welch (2008), as well as the original 17 variables, were useful in predicting the equity premium in-sample and out-of-sample as of the end of 2021. Our samples include the original periods in which these variables were identified, but end later. About half of the new variables have no empirical significance even in-sample. Of those that do, about half have poor out-of-sample performance. A small number of variables still perform reasonably well both in-sample and out-of-sample.

Keywords: equity premium, prediction, out-of-sample, skepticism

JEL Classification: G1,G11,G12