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

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

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.

Suggested Citation

  • Hollstein, Fabian & Prokopczuk, Marcel & Tharann, Björn & Wese Simen, Chardin, 2025. "Predicting the equity premium around the globe: Comprehensive evidence from a large sample," International Journal of Forecasting, Elsevier, vol. 41(1), pages 208-228.
    • Handle: RePEc:eee:intfor:v:41:y:2025:i:1:p:208-228
    DOI: 10.1016/j.ijforecast.2024.05.002
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