Amit Goyal

University of Lausanne


NBER Working Papers and Publications

November 2004A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability
with Michael W. Brandt, Pedro Santa-Clara, Jonathan Storud: w10934
We present a simulation-based method for solving discrete-time portfolio choice problems involving non-standard preferences, a large number of assets with arbitrary return distribution, and, most importantly, a large number of state variables with potentially path-dependent or non-stationary dynamics. The method is flexible enough to accommodate intermediate consumption, portfolio constraints, parameter and model uncertainty, and learning. We first establish the properties of the method for the portfolio choice between a stock index and cash when the stock returns are either iid or predictable by the dividend yield. We then explore the problem of an investor who takes into account the predictability of returns but is uncertain about the parameters of the data generating process. The invest...

Published: Brandt, Michael W., Amit Goyal, Pedro Santa-Clara, and Jonathan R. Stroud. "A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability." Review of Financial Studies 18 (2005): 831-873. citation courtesy of

May 2004A Comprehensive Look at the Empirical Performance of Equity Premium Prediction
with Ivo Welch: w10483
Given the historically high equity premium, is it now a good time to invest in the stock market? Economists have suggested a whole range of variables that investors could or should use to predict: dividend price ratios, dividend yields, earnings-price ratios, dividend payout ratios, net issuing ratios, book-market ratios, interest rates (in various guises), and consumption-based macroeconomic ratios (cay). The typical paper reports that the variable predicted well in an *in-sample* regression, implying forecasting ability. Our paper explores the *out-of-sample* performance of these variables, and finds that not a single one would have helped a real-world investor outpredicting the then-prevailing historical equity premium mean. Most would have outright hurt. Therefore, we find that, for al...

Published: Ivo Welch & Amit Goyal, 2008. "A Comprehensive Look at The Empirical Performance of Equity Premium Prediction," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(4), pages 1455-1508, July. citation courtesy of

February 2002Predicting the Equity Premium With Dividend Ratios
with Ivo Welch: w8788
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 fo...

Published: Goyal, Amit, and Ivo Welch. "Predicting the Equity Premium With Dividend Ratios." Management Science 49-5 (May 2003): 639-654. citation courtesy of

NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us