RT Journal Article
SR Electronic
T1 Estimating Expected Returns
JF The Journal of Investing
FD Institutional Investor Journals
SP 49
OP 57
DO 10.3905/joi.2003.319554
VO 12
IS 3
A1 Thomas K. Philips
YR 2003
UL https://pm-research.com/content/12/3/49.abstract
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.