Abstract

http://ssrn.com/abstract=1654026
 
 

References (29)



 
 

Citations (5)



 


 



The Equity Risk Premium in 2010


John R. Graham


Duke University; National Bureau of Economic Research (NBER)

Campbell R. Harvey


Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

August 9, 2010


Abstract:     
We analyze the history of the equity risk premium from surveys of U.S. Chief Financial Officers (CFOs) conducted every quarter from June 2000 to June 2010. The risk premium is the expected 10-year S&P 500 return relative to a 10-year U.S. Treasury bond yield. While the risk premium sharply increased during the financial crisis peaking in February 2009, the current surveys show that the premium has returned to levels observed in late 2006 and early 2007. The survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. While disagreement has decreased from peak levels, the level of disagreement is still historically high suggesting considerable uncertainty. We also present evidence on the determinants of the long-run risk premium. Our analysis suggests the level of the risk premium closely tracks both market volatility (reflected in the VIX index) as well as credit spreads.

Number of Pages in PDF File: 21

Keywords: Cost of capital, financial crisis, equity premium, long-term market returns, long-term equity returns, expected excess returns, disagreement, individual uncertainty, skewness, asymmetry, survey methods, risk and reward, TIPs, VIX, Credit spreads

JEL Classification: G11, G31, G12, G14

working papers series





Download This Paper

Date posted: August 6, 2010 ; Last revised: August 10, 2010

Suggested Citation

Graham, John R. and Harvey, Campbell R., The Equity Risk Premium in 2010 (August 9, 2010). Available at SSRN: http://ssrn.com/abstract=1654026 or http://dx.doi.org/10.2139/ssrn.1654026

Contact Information

John Robert Graham
Duke University ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Campbell R. Harvey (Contact Author)
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 5,478
Downloads: 1,480
Download Rank: 6,020
References:  29
Citations:  5

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.657 seconds