02020cam a22002777 4500001000700000003000500007005001700012008004100029100002300070245012000093260006600213490004200279500001600321520075700337530006101094538007201155538003601227690011201263690012701375700002201502700002401524710004201548830007701590856003801667856003701705w10406NBER20160530221827.0160530s2004 mau||||fs|||| 000 0 eng d1 aPolk, Christopher.10aNew Forecasts of the Equity Premiumh[electronic resource] /cChristopher Polk, Samuel Thompson, Tuomo Vuolteenaho. aCambridge, Mass.bNational Bureau of Economic Researchc2004.1 aNBER working paper seriesvno. w10406 aApril 2004.3 aIf investors are myopic mean-variance optimizers, a stock's expected return is linearly related to its beta in the cross section. The slope of the relation is the cross-sectional price of risk, which should equal the expected equity premium. We use this simple observation to forecast the equity-premium time series with the cross-sectional price of risk. We also introduce novel statistical methods for testing stock-return predictability based on endogenous variables whose shocks are potentially correlated with return shocks. Our empirical tests show that the cross-sectional price of risk (1) is strongly correlated with the market's yield measures and (2) predicts equity-premium realizations especially in the first half of our 1927-2002 sample. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aG12 - Asset Pricing • Trading Volume • Bond Interest Rates2Journal of Economic Literature class. 7aG14 - Information and Market Efficiency • Event Studies • Insider Trading2Journal of Economic Literature class.1 aThompson, Samuel.1 aVuolteenaho, Tuomo.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w10406.4 uhttp://www.nber.org/papers/w1040641uhttp://dx.doi.org/10.3386/w10406