This paper studies the ability of long-run risk models, following Bansal and Yaron (2004) and others, to explain out-of-sample asset returns associated with the equity premium puzzle, size and book-to-market effects, momentum, reversals, and bond returns of different maturity and credit ratings....

This paper studies the ability of stationary and cointegrated versions of long-run risk models to explain out-of-sample asset returns during 1931-2009. The models perform similarly overall to the classical Capital Asset Pricing Model in a mean squared error sense, but have smaller average...

This paper studies the ability of long-run risk models to explain out-of-sample asset returns during 1931-2009. The long-run risk models perform relatively well on the momentum effect. A cointegrated version of the model outperforms the classical, stationary version. Both the long-run and the...