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A Meta-Analysis of the Equity Premium

28 Pages Posted: 12 Nov 2010  

Casper Van Ewijk

CPB Netherlands Bureau of Economic Policy Analysis

Henri L. F. de Groot

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Coos Santing

affiliation not provided to SSRN

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

Van Ewijk, Casper and de Groot, Henri L. F. and Santing, Coos, A Meta-Analysis of the Equity Premium (September 12, 2010). Netspar Discussion Paper No. 09/2010-050. Available at SSRN: https://ssrn.com/abstract=1708100 or http://dx.doi.org/10.2139/ssrn.1708100

Casper Van Ewijk (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Henri L.F. De Groot

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands
+31 20 598 6168 (Phone)
+31 20 598 6004 (Fax)

Tinbergen Institute

Gustav Mahlerplein 17
Amsterdam, 1082 MS
Netherlands

Coos Santing

affiliation not provided to SSRN ( email )

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