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The Equity Premium in 100 Textbooks

Pablo Fernandez

University of Navarra - IESE Business School

February 2, 2009

I review 100 finance and valuation textbooks published between 1979 and 2008 (Brealey, Myers, Copeland, Damodaran, Merton, Ross, Bruner, Bodie, Penman, Weston, Arzac...) and find that their recommendations regarding the equity premium range from 3% to 10%, and that several books use different equity premia in different pages.

Some confusion arises from not distinguishing among the four concepts that the word equity premium designates: Historical equity premium, Expected equity premium, Required equity premium and Implied equity premium.

Finance professors should clarify the different concepts of equity premium and convey a clearer message about their sensible magnitudes.

Number of Pages in PDF File: 25

Keywords: equity premium, required market risk premium, historical market risk premium

JEL Classification: G12, G31, M21

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Date posted: June 25, 2008 ; Last revised: February 6, 2009

Suggested Citation

Fernandez, Pablo, The Equity Premium in 100 Textbooks (February 2, 2009). Available at SSRN: http://ssrn.com/abstract=1148373 or http://dx.doi.org/10.2139/ssrn.1148373

Contact Information

Pablo Fernandez (Contact Author)
University of Navarra - IESE Business School ( email )
Camino del Cerro del Aguila 3
28023 Madrid
+34 91 357 0809 (Phone)
+34 91 357 2913 (Fax)
HOME PAGE: http://web.iese.edu/PabloFernandez/
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