Predicting the equity premium around the globe: Comprehensive evidence from a large sample

Fabian Hollstein, Marcel Prokopczuk, Björn Tharann and Chardin Wese Simen

International Journal of Forecasting, 2025, vol. 41, issue 1, 208-228

Abstract: Examining 81 countries over a period of up to 145 years and using various predictor variables and forecasting specifications, we provide a detailed analysis of equity premium predictability. We find that excess returns are more predictable in emerging and frontier markets than in developed markets. For all groups, forecast combinations perform very well out of sample. Analyzing the cross-section of countries, we find that market inefficiency is an important driver of return predictability. We also document significant cross-market return predictability. Finally, domestic inflation-adjusted returns are significantly more predictable than USD returns.

Keywords: International equity premium; Return predictability; Market efficiency; Market development; Cross-market return predictability (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:41:y:2025:i:1:p:208-228

DOI: 10.1016/j.ijforecast.2024.05.002

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