This paper proposes a new dividend-based S&P 500 Index return predictor, the implied dividend yield term structure (IDYTS). We show that the IDYTS is a “cleaner” predictor than its conventional counterpart, the dividend price ratio (DP), in that the expected return is a linear combination...

The least squares Monte Carlo method of Longstaff and Schwartz has become a standard numerical method for option pricing with many potential risk factors. An important choice in the method is the number of regressors to use and using too few or too many regressors leads to biased results. This...