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The Equity Premium
Eugene F. Fama University of Chicago - Booth School of Business Kenneth R. French Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER) April 2001 EFMA 2001 Lugano Meetings; CRSP Working Paper No. 522 Abstract: We estimate the equity premium using dividend and earnings growth rates to measure the expected rate of capital gain. Our estimates for 1951-2000, 2.55% and 4.32%, are much lower than the equity premium produced by the average stock return, 7.43%. Our evidence suggests that the high average return for 1951-2000 is due to a decline in discount rates that produces large unexpected capital gains. Our main conclusion is that the stock return of the last half-century is a lot higher than expected.
JEL Classifications: G12 Working Paper SeriesDate posted: July 20, 2000 ; Last revised: January 01, 2002Suggested CitationContact Information
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