Abstract

http://ssrn.com/abstract=241356
 
 

Citations



 


 



Risk and Return in the 20th and 21st Centuries


Elroy Dimson


London Business School; University of Cambridge - Judge Business School

Paul Marsh


London Business School - Institute of Finance and Accounting

Mike Staunton


London Business School - Institute of Finance and Accounting


Business Strategy Review, Vol. 11, No. 2, Summer 2000

Abstract:     
The single most important contemporary issue in finance is the equity risk premium. This drives future equity returns, and is the key determinant of the cost of capital. The risk premium, the expected reward for bearing the risk of investing in equities, rather than in low-risk investments such as bills or bonds, is usually estimated from historical data. This article starts by summarising new evidence on historical returns in twelve major world markets from the authors' recent book, 'The Millennium Book: A Century of Investment Returns'. The authors show that the historical equity risk premium has been lower than previously believed, and argue that the future risk premium is likely to be lower still. They discuss what this implies for the cost of capital, stock market values, and companies' target rates of return. They suggest that many companies are seeking too high a rate of return and thus run the risk of under-investing.

Accepted Paper Series


Not Available For Download

Date posted: March 5, 2001  

Suggested Citation

Dimson, Elroy and Marsh, Paul and Staunton, Mike, Risk and Return in the 20th and 21st Centuries. Business Strategy Review, Vol. 11, No. 2, Summer 2000. Available at SSRN: http://ssrn.com/abstract=241356

Contact Information

Elroy Dimson (Contact Author)
London Business School ( email )
Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
44 20 7000 7000 (Phone)
44 700 607 7390 (Fax)
HOME PAGE: http://www.london.edu/faculty/edimson
University of Cambridge - Judge Business School
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
Paul Marsh
London Business School - Institute of Finance and Accounting ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
Mike Staunton
London Business School - Institute of Finance and Accounting ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
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