Frank Coggins

Additional Evidence on Information Variables and Equity Premium Predictability

This paper presents the most comprehensive out-of-U.S.-sample examination of information variables and equity premium predictability by focusing on Canada. Using monthly data for 36 variables from 1950 to 2013, we test their individual predictive ability and provide a new empirical assessment of the related econometric issues. We find conclusive and robust evidence of in-sample, out-of-sample and economically meaningful predictability of the Canadian equity premium, providing guidance on each variable as a market indicator. Our results generally support the existing evidence in favor of predictability, but cast doubt on some variables that have been successful predictors for the U.S. equity premium.