Pettenuzzo, Davide; Timmermann, Allan; Valkanov, Rossen - In: Journal of Financial Economics 114 (2014) 3, pp. 517-553
We propose a new approach to imposing economic constraints on time series 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...
