Pettenuzzo, Davide; Timmermann, Allan; Valkanov, Rossen - Department of Economics, International Business School, … - 2013
We propose a new approach to imposing economic constraints on time-series forecasts of the equity premium. Economic … framework. Empirically, we Önd that economic constraints systematically reduce uncertainty about model parameters, reduce the … constraints are used to modify the posterior distribution of the parameters of the predictive return regression in a way that …