This paper examines the predictability of stock returns in France, Germany, Japan, the UK, and the US using three instruments: the dividend yield, the earnings yield, and the short rate. The authors propose a present value model with earnings growth, payout ratios, and the short rate as state variables to test for predictability. They find that the short rate is the only robust short-run predictor of equity returns, while the evidence on earnings and dividend yield predictability is not robust across different sample periods and countries. The study also finds that cross-country predictability is stronger than using local instruments, with US instruments being strong predictors of foreign equity returns. The authors conclude that the debate on stock return predictability may be focusing on the wrong horizon, instruments, and setting.This paper examines the predictability of stock returns in France, Germany, Japan, the UK, and the US using three instruments: the dividend yield, the earnings yield, and the short rate. The authors propose a present value model with earnings growth, payout ratios, and the short rate as state variables to test for predictability. They find that the short rate is the only robust short-run predictor of equity returns, while the evidence on earnings and dividend yield predictability is not robust across different sample periods and countries. The study also finds that cross-country predictability is stronger than using local instruments, with US instruments being strong predictors of foreign equity returns. The authors conclude that the debate on stock return predictability may be focusing on the wrong horizon, instruments, and setting.