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A note on the economics and statistics of predictability: A long run risks perspective

The Wharton School, University of Pennsylvania; The Wharton School, University of Pennsylvania and NBER
12/2007;

ABSTRACT Asset return and cash flow predictability is of considerable interest in financial economics. In this note, we show that the magnitude of this predictability in the data is quite small and is consistent with the implications of the long-run risks model.

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