Abstract

http://ssrn.com/abstract=891620
 
 

References (109)



 
 

Citations (48)



 


 



The Worldwide Equity Premium: A Smaller Puzzle


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

April 7, 2006

EFA 2006 Zurich Meetings Paper
AFA 2008 New Orleans Meetings Paper

Abstract:     
We use a new database of long-run stock, bond, bill, inflation, and currency returns to estimate the equity risk premium for 17 countries and a world index over a 106-year interval. Taking U.S. Treasury bills (government bonds) as the risk-free asset, the annualised equity premium for the world index was 4.7% (4.0%). We report the historical equity premium for each market in local currency and US dollars, and decompose the premium into dividend growth, multiple expansion, the dividend yield, and changes in the real exchange rate. We infer that investors expect a premium on the world index of around 3-3 1/2% on a geometric mean basis, or approximately 4 1/2-5% on an arithmetic basis.

Number of Pages in PDF File: 41

Keywords: Equity risk premium, long run returns, survivor bias, financial history, stocks bonds bills inflation

JEL Classification: G12, G15, G23, G31, N20

working papers series


Download This Paper

Date posted: March 17, 2006  

Suggested Citation

Dimson, Elroy and Marsh, Paul and Staunton, Mike, The Worldwide Equity Premium: A Smaller Puzzle (April 7, 2006). EFA 2006 Zurich Meetings Paper; AFA 2008 New Orleans Meetings Paper. Available at SSRN: http://ssrn.com/abstract=891620 or http://dx.doi.org/10.2139/ssrn.891620

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
Feedback to SSRN


Paper statistics
Abstract Views: 39,109
Downloads: 15,983
Download Rank: 78
References:  109
Citations:  48

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.344 seconds