%0 Journal Article
%A Philips, Thomas K.
%T Estimating Expected Returns
%D 2003
%R 10.3905/joi.2003.319554
%J The Journal of Investing
%P 49-57
%V 12
%N 3
%X 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.
%U https://joi.pm-research.com/content/iijinvest/12/3/49.full.pdf