TY - JOUR T1 - Estimating Expected Returns JF - The Journal of Investing SP - 49 LP - 57 DO - 10.3905/joi.2003.319554 VL - 12 IS - 3 AU - Thomas K. Philips Y1 - 2003/08/31 UR - https://pm-research.com/content/12/3/49.abstract N2 - I present simple estimators for the expected returns of stocks and bonds and compare them to the standard historical, or sample mean, estimator. I show that as a result of a capital gains constraint that stocks and bonds must satisfy, the historical estimator can be acutely biased. I further show that an estimator for the expected return of stocks derived from the Edwards-Bell-Ohlson equation yields unbiased estimates that are useful in practice. Finally, I estimate the equity risk premium and show that it is positive, contradicting Arnott and Ryan's [2001] claim that it is negative. ER -