We propose a new approach to imposing economic constraints on forecasts of the equity premium. Economic constraints are used to modify the posterior distribution of the parameters of the predictive return regression in a way that better allows the model to learn from the data. We consider two...

We develop a new approach to modeling dynamics in cash flow data extracted from daily firm-level dividend announcements. We decompose daily cash flow news into a persistent component, jumps, and temporary shocks. Empirically, we find that the persistent cash flow component is a highly...

We develop a novel method to impose constraints on univariate predictive regressions of stock returns. Unlike the previous approaches in the literature, we implement our constraints directly on the predictor, setting it to zero whenever its value falls below the variable's past 12-month high....