One of the most studied questions in economics and finance is whether equity returns or premiums can be predicted by empirical models. While many authors favor the historical mean or other simple parametric methods, this article focuses on nonlinear relationships. A straightforward...

The question of whether empirical models are able to forecast the equity premium more accurately than the simple historical mean is intensively debated in the nancial literature. The low prediction power is disappointing, even when using nonparametric models that make use of typical predictor...