PT  - JOURNAL ARTICLE
AU  - Thomas K. Philips
TI  - Estimating Expected Returns
AID  - 10.3905/joi.2003.319554
DP  - 2003 Aug 31
TA  - The Journal of Investing
PG  - 49--57
VI  - 12
IP  - 3
4099  - https://pm-research.com/content/12/3/49.short
4100  - https://pm-research.com/content/12/3/49.full
AB  - 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.