@techreport{NBERw8788,
 title = "Predicting the Equity Premium With Dividend Ratios",
 author = "Amit Goyal and Ivo Welch",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "8788",
 year = "2002",
 month = "February",
 URL = "http://www.nber.org/papers/w8788",
 abstract = {Our paper reexamines the forecasting regressions which predict annual aggregate stock market returns net of the risk-free rate with lagged aggregate dividend-yield ratios and dividend-price ratios.  Prior to 1990, the conditional dividend yield could reliably outperform the historical equity premium mean in predicting future equity premia *in-sample*. But our paper shows that the dividend ratios could not outperform the prevailing unconditional mean *out-of-sample*, plus any residual power was directly related to only two years, 1974 and 1975.  As of 2000, even this in-sample predictive ability has disappeared.  Our paper also documents changes in the time-series processes of the dividends themselves and shows that an increasing persistence of dividend-price ratio is largely responsible for weak stock return predictability.},
}