by Arjun Singh Jaswal
Abstract
The use of 5 variables is examined in order to forecast ex ante the total return from holding equities over 10 year periods. The 5 variables are a moving average of Campbell and Shiller’s P/E ratio, Robert B. Barsky and J. Bradford De Long’s log price predictor, a function of James Tobin’s q, the rate of change of GDP over 30 years and the rate of change of cash flow over 10 years. The significance of these variables is explained by considering them individually, simultaneously and finally under the architecture suggested by David Hirshleifer.
Professor Edward Tower, Faculty Advisor
JEL Codes: C3, E22
