This online appendix provides additional results in support of the analysis presented in the above-mentioned paper. First, we provide details on how we simulate from the posterior and predictive distributions for both the uniform and shrinkage prior. Second, we explain the numerical method we...

We evaluate the out-of-sample performance of a long-term investor who follows an optimized dynamic trading strategy. Although the dynamic strategy is able to benefit from predictability out-of-sample, a short-term investor using a single period market timing strategy would have realized an...

We propose a hybrid approach for estimating beta that shrinks rolling window estimates toward firm-specific priors motivated by economic theory. Our method yields superior forecasts of beta that have important practical implications. First, unlike standard rolling window betas, hybrid betas...

This study provides European evidence on the ability of static and dynamic specifications of the Fama-French (1993) three-factor model to price 25 size-B/M portfolios. In contrast to US evidence, we detect a small-growth premium and find that the size effect is still present in Europe....

None of the attempts to solve the equity premium puzzle has proved to be completely successful. In this paper I argue that implementing the income in the utility function can considerably contribute to the explanation of the equity premium puzzle. Empirical evidence supports this idea. Further...

Based on unique data we show that macro variables, the default rate and loss given default of bank loans share common cyclical components. The innovation in our model is the distinction between loans with either severe or mild losses. The variation in the proportion of these two types drives the...

We develop a method to identify the most important predictors of long-term asset returns and use it to analyze the impact of model uncertainty on long-term investors. We find that the impact of model uncertainty changes a lot over time which leads to considerable time-variation in all moments of...