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. More than one-third of these new variables no longer have empirical significance even in-sample. Of those that do, half have poor out-of-sample performance. A small number of variables still perform reasonably well both in-sample and out-of-sample.