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 propose a new approach to predictive density modeling that allows for MIDAS effects in both the first and second moments of the outcome. Specifically, our modeling approach allows for MIDAS stochastic volatility dynamics, generalizing a large literature focusing on MIDAS effects in the...

This paper proposes a new approach for incorporating theoretical constraints on return forecasting models such as non-negativity of the conditional equity premium and sign restrictions on the coefficients linking state variables to the equity premium. Our approach makes use of Bayesian methods...

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...