A Meta-Analysis of the Equity Premium
28 Pages Posted: 12 Nov 2010
Date Written: September 12, 2010
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.
Keywords: Equity Premium, Meta-Analysis
JEL Classification: D53, E44, G12, N20
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Equity Premium Consensus Forecast Revisited
By Ivo Welch
-
The Worldwide Equity Premium: A Smaller Puzzle
By Elroy Dimson, Paul Marsh, ...
-
The Market Risk Premium: Expectational Estimates Using Analysts' Forecasts
-
The Equity Risk Premium in 2008: Evidence from the Global CFO Outlook Survey
By John R. Graham and Campbell R. Harvey
-
Equity Risk Premiums (ERP): Determinants, Estimation and Implications
-
The Equity Risk Premium in January 2007: Evidence from the Global Cfo Outlook Survey
By John R. Graham and Campbell R. Harvey
-
Equity Risk Premiums (ERP): Determinants, Estimation and Implications – The 2011 Edition
-
The Equity Risk Premium in January 2006: Evidence from the Global Cfo Outlook Survey
By John R. Graham and Campbell R. Harvey
-
Equity Risk Premiums (ERP): Determinants, Estimation and Implications - The 2010 Edition
-
Equity Risk Premiums (ERP): Determinants, Estimation and Implications – The 2012 Edition