A Scenario Analysis of the Risk Premium in G7 Countries

International Journal of Theoretical and Applied Finance, Vol. 11, No. 7, pp. 673-689, 2008

17 Pages Posted: 2 Dec 2009 Last revised: 31 Dec 2009

See all articles by Mohammed Omran

Mohammed Omran

The Insurance Holding Company; Arab Academy for Science and Technology

John Pointon

University of Plymouth

Date Written: November 1, 2008

Abstract

In this investigation over 144,000 simulations are undertaken of country equity risk premia, based on a scenario analysis of the uncertainty surrounding the period of non-sustainable growth in earnings and stock returns. Final estimates, from the larger data-sets in Japan, the US and the UK, are around 3-6% in nominal terms, and compare well with other methodologies. However, except for Canada, the smaller data-sets in France, Germany and Italy reveal much higher risk premia than expected. Furthermore, given the spreads in estimates generally, the issue of sustainability is still contentious.

Keywords: Risk premium, growth, G7, earnings, returns

Suggested Citation

Omran, Mohammed M. and Pointon, John, A Scenario Analysis of the Risk Premium in G7 Countries (November 1, 2008). International Journal of Theoretical and Applied Finance, Vol. 11, No. 7, pp. 673-689, 2008 , Available at SSRN: https://ssrn.com/abstract=1516234

Mohammed M. Omran (Contact Author)

The Insurance Holding Company ( email )

7 Talet Herb Street
Cairo
Egypt

Arab Academy for Science and Technology ( email )

P.O. Box. 1029
College of Management and Technology
Miami, Alexandria
Egypt
(203) 5482 532 (Phone)
(203) 5566 072 (Fax)

John Pointon

University of Plymouth ( email )

Mast House
Plymouth, Devon PL4 8AA
United Kingdom
+44-1752-232826 (Phone)
+44-1752-232853 (Fax)

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