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Time Series Data Used in Chapter 14 629

E14.2 Read the boxes “Can You Beat the Market? Part I” and “Can You Beat
the Market? Part II” in this chapter. Next, go to the course website, where
you will find an extended version of the data set described in the boxes;
the data are in the file Stock_Returns_1931_2002 and are described in the
file Stock_Returns_1931_2002_Description.

a. Repeat the calculations reported in Table 14.2, using regressions
estimated over the 1932:M1–2002:M12 sample period.

b. Repeat the calculations reported in Table 14.6, using regressions esti-
mated over the 1932:M1–2002:M12 sample period.

c. Is the variable ln(dividend yield) highly persistent? Explain.
d. Construct pseudo out-of-sample forecasts of excess returns over

the 1983:M1–2002:M12 period, using regressions that begin in
1932:M1.
e. Do the results in (a) through (d) suggest any important changes to the
conclusions reached in the boxes? Explain.

A p p e n d i x

14.1 Time Series Data Used in Chapter 14

Macroeconomic time series data for the United States are collected and published by
various government agencies. The Bureau of Economic Analysis in the Department of
Commerce publishes the National Income and Product Accounts, which include the GDP
data used in this chapter. The unemployment rate is computed from the Bureau of Labor
Statistics’s Current Population Survey (see Appendix 3.1). The quarterly data used here
were computed by averaging the monthly values. The 10-year Treasury bond rate, 3-month
Treasury bill rate, and the dollar/pound exchange rate data are quarterly averages of daily
rates, as reported by the Federal Reserve. The index of industrial production for Japan is
published by the Organisation for Economic Co-operation and Development (OECD).
The daily percentage change in the Wilshire 5000 stock price index was computed as
100Δln(W5000t), where W5000t is the daily value of the index; because the stock exchange
is not open on weekends and holidays, the time period of analysis is a business day. We
obtained all these data series from the Federal Reserve Economic Data (FRED) website
at the Federal Reserve Bank of St. Louis. There you can find times series data on thou-
sands of macroeconomic variables.

The regressions in Table 14.2 and 14.6 use monthly financial data for the United States.
Stock prices (Pt) are measured by the broad-based (NYSE and AMEX) value-weighted