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Title: The equity premium
Authors: Kyriacou, K
Madsen, J
Mase, B
Keywords: Equity risk premium; market integration
Issue Date: 2004
Publisher: Brunel University
Citation: Economics and Finance Discussion Papers, Brunel University, 04-10.
Abstract: Recent research on the equity risk premium has questioned the ability of historical estimates of the risk premium to provide reliable estimates of the expected risk premium. We calculate the equity risk premium for a number of countries over longer horizons than has been attempted to date. We show that the realised US equity premium is consistent with the premia obtained elsewhere. Furthermore, using well over a century of data, we find that current estimates of the equity premia are close to those observed during the pre-1914 era. This is of particular relevance given the argument that the financial environment during that period bears a closer resemblance to today than the 1914-1945 period, and possibly also the 1945-1971 period. This points to a current equity risk premium that is considerably lower than consensus forecasts (Welch 2001).
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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