We combine annual stock market data for the most important equity markets of the last four centuries: the Netherlands/U.K. (1629-1812), U.K. (1813-1870) and U.S. (1871-2015). We show that dividend yields are stationary and consistently forecast returns. The documented predictability holds for...

Most brokerage firms are owned by publicly traded financial conglomerates. As much as 5% of the stock of these conglomerates is held by mutual funds that are broker's clients. Moreover, in times of distress when investors tend to decrease exposure to financial companies, client funds increase...

Ample evidence suggests that individuals are overly optimistic about future outcomes. But does the length of a particular forecast horizon affect optimism levels? In this paper, we extend Brunnermeier and Parker's (2005) optimal expectations framework to a multi-period model, which casts the...

We design a new test for diseconomies of scale at the mutual fund level, and document that quarterly changes in fund performance are negatively related to lagged predicted fund flows. The effect is economically and statistically significant for both inflows and outflows. Results hold for factor...

We study the impact of monetary policy on the term structure of equity prices. We find that short-term and long-term equity prices respond in opposite ways to changes in monetary policy. Following an unanticipated cut in the target federal funds rate, short-term equity prices fall while...

We provide empirical evidence that the optimism bias increases with the forecasting horizon. We label this empirical regularity the horizon bias. In the US and abroad, professional forecasters demonstrate significant horizon bias in their macroeconomic expectations. Our results show a horizon...