History and the Equity Risk Premium
Roger G. Ibbotson
Yale School of Management; Zebra Capital Management, LLC
William N. Goetzmann
Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)
April 6, 2005
Yale ICF Working Paper No. 05-04
We summarize some of our own past findings and place them in the context of the historical development of the idea of the equity risk premium and its empirical measurement by financial economists. In particular, we focus on how the theory of compensation for investment risk developed in the 20th century in tandem with the empirical analysis of historical investment performance. Finally, we update our study of the historical performance of the New York Stock Exchange over the period 1792 to the present, and include a measure of the U.S. equity risk premium over more than two centuries. This last section is based upon indices constructed from individual stock and dividend data collected over a decade of research at the Yale School of Management, and contributions by other scholars.
Number of Pages in PDF File: 19
Keywords: financial history, equity premium
JEL Classification: N2, G11
Date posted: April 12, 2005
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