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The Great Divergence: French Equity Premium is Lower and Riskier than the US Since WWI

Bankers, Markets& Investors, 118, 2012, p. 9-17

20 Pages Posted: 29 Dec 2008 Last revised: 28 Sep 2012

Sandrine Tobelem

London School of Economics & Political Science (LSE)

David Le Bris

Toulouse Business School

Date Written: June 1, 2011

Abstract

In this paper, we compare the US and French risk premium computed on high quality data. We confirm that the US risk premium has been constantly higher. We also show that the US equity outperformance is even higher when we compute the price of risk. Indeed, the US equity risk has been lower than the French one since 1917. The two world wars do not seem to explain the risk premium difference, as the US continues to outperform the French equity market after 1950. We conclude that the particular case of the outperformance of the US equity cannot be directly extrapolated to other equity markets.

Suggested Citation

Tobelem, Sandrine and Le Bris, David, The Great Divergence: French Equity Premium is Lower and Riskier than the US Since WWI (June 1, 2011). Bankers, Markets& Investors, 118, 2012, p. 9-17 . Available at SSRN: https://ssrn.com/abstract=1321406 or http://dx.doi.org/10.2139/ssrn.1321406

Sandrine Tobelem (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

David Le Bris

Toulouse Business School ( email )

20, bd Lascrosses
Toulouse, 31068
France

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