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A Meta-Analysis of the Equity PremiumCasper Van EwijkCPB Netherlands Bureau of Economic Policy Analysis Henri L. F. De GrootVU University Amsterdam - Department of Spatial Economics; Tinbergen Institute Coos Santingaffiliation not provided to SSRN September 12, 2010 Netspar Discussion Paper No. 09/2010-050 Abstract: The equity premium is a key parameter in asset allocation policies. There is a vigorous debate in the literature regarding the actual measurement of the equity premium, its size and the determinants of its variation. This study aims to take stock of this literature by means of a meta-analysis. We identify how the size of the equity premium depends on the way it is measured, along with its evolution over time and its variation across regions in the world. We find that the equity premium is significantly lower if measured by ex ante methods rather than ex post, in more recent periods, and for more developed countries. In addition, looking at the underlying fundamentals, we find that larger volatility in GDP growth tends to raise the equity premium while a higher nominal interest rate has a negative impact on the equity premium.
Number of Pages in PDF File: 28 Keywords: Equity Premium, Meta-Analysis JEL Classification: D53, E44, G12, N20 working papers seriesDate posted: November 12, 2010Suggested CitationContact Information
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