Time-varying predictability of the long horizon equity premium based on semiparametric regressions

Deshui Yu, Li Chen and Luyang Li

Economics Letters, 2023, vol. 224, issue C

Abstract: This paper proposes a novel semiparametric model for long-horizon predictive regressions, in which the coefficients are allowed to be unknown functions of time. We pursue an indirect approach to estimate the long-horizon coefficients through the implication of the short-horizon coefficients. Empirically, the dividend-price ratio predicts either stock returns or dividend growth, or both in any local period. In comparison, dividend growth is less predictable than stock returns.

Keywords: Long-horizon stock return; Time-varying coefficient; Profile estimation; Present-value model (search for similar items in EconPapers)
JEL-codes: C14 C22 G17 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:224:y:2023:i:c:s0165176523000587

DOI: 10.1016/j.econlet.2023.111033

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