Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 853: Long-Run Stock Return Distributions: Empirical Inference and Uncertainty
Andreas Dzemski (), Adam Farago (), Erik Hjalmarsson () and Tamas Kiss ()
Additional contact information
Andreas Dzemski: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Adam Farago: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Erik Hjalmarsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Tamas Kiss: The School of Business, Örebro University, Sweden
Abstract: We analyze empirical estimation of the distribution of total payoffs for stock investments over very long horizons, such as 30 years. Formal results for recently proposed bootstrap estimators are derived and alternative parametric methods are proposed. All estimators should be viewed as inconsistent for longer investment horizons. Valid confidence bands are derived and should be the focus when performing inference. Empirically, confidence bands around long-run distributions are very wide and point estimates must be interpreted with great caution. Consequently, it is difficult to distinguish long-run aggregate return distributions across countries; long-run U.S. returns are not significantly different from global returns.
Keywords: Estimation uncertainty; Long-run stock returns; Quantile estimation
Language: English
121 pages, April 28, 2025
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