Forecasting Equity Premium: Global Historical Average Versus Local Historical Average and Constraints
نویسندگان
چکیده
منابع مشابه
Forecasting Equity Premium: Global Historical Average versus Local Historical Average and Constraints∗
The equity premium, return on equity minus return on risk-free asset, is expected to be positive. We consider imposing such positivity constraint in local historical average (LHA) in nonparametric kernel regression framework. It is also extended to the semiparametric single index model when multiple predictors are used. We construct the constrained LHA estimator via an indicator function which ...
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Mehra and Prescott (1985) found the difference between average equity and debt returns puzzling because it was too large to be a premium for bearing nondiversifiable aggregate risk. Here, we re-examine this puzzle, taking into account some factors ignored by Mehra and Prescott–taxes, regulatory constraints, and diversification costs–and focusing on long-term rather than short-term savings instr...
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ژورنال
عنوان ژورنال: Journal of Business & Economic Statistics
سال: 2015
ISSN: 0735-0015,1537-2707
DOI: 10.1080/07350015.2014.955174