The economic gains from using equity premium forecasts are usually assessed by comparing a forecast-based strategy to a strategy based on the trailing historical mean. Whether these economic gains are statistically significant remains mostly untested. This paper shows that a buy-and-hold...

This paper proposes a Bayesian estimation framework for a typical multi-factor model with time-varying risk exposures to macroeconomic risk factors and corresponding premia to price U.S. stocks and bonds. The model assumes that risk exposures and idiosyncratic volatility follow a break-point...