Journal of Investment Strategies
ISSN:
2047-1238 (print)
2047-1246 (online)
Editor-in-chief: Ali Hirsa

The enhanced risk premium factor model and expected returns
Javier Estrada
Abstract
ABSTRACT
The predictability of the equity risk premium is a central and controversial issue in finance. The risk premium factor model is a recent and novel approach to forecasting the equity risk premium and the level and price earnings ratio of the equity market. This paper aims to overcome the main limitation of, and therefore improve upon, this novel approach. The enhanced risk premium factor model proposed here to forecast the market return is clearly supported by the evidence. Furthermore, a model that articulates the same variables considered in the framework proposed, but that imposes no specific functional form to relate them, produces very highly correlated and unbiased forecasts of the market return.
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Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
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