Equity Premium Used in 2011 for the USA by Analysts, Companies and Professors: A Survey

17 Pages Posted: 29 Jul 2011

See all articles by Pablo Fernandez

Pablo Fernandez

University of Navarra - IESE Business School

Javier Aguirreamalloa

IESE Business School

Luis Corres Avendaño

IESE

Date Written: July 8, 2011

Abstract

The average Equity Premium or Market Risk Premium (MRP) used in 2011 by professors for the USA (5.7%) is higher than the one used by analysts (5.0%) and companies (5.6%).

The standard deviation of the MRP used in 2011 by analysts (1.1%) is lower than the ones of companies (2.0%) and professors (1.6%).

Most previous surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references used to justify the MRP, comments from 58 persons that do not use MRP, and comments of 110 that do use MRP. The comments illustrate the various interpretations of the required MRP and its usefulness.

Professors, analysts and companies that cite Ibbotson as their reference use MRP for USA between 2% and 14.5%, and the ones that cite Damodaran as their reference use MRP between 2% and 10.8%.

Keywords: equity premium, required equity premium, expected equity premium, historical equity premium

JEL Classification: G12, G31, M21

Suggested Citation

Fernandez, Pablo and Aguirreamalloa, Javier and Avendaño, Luis Corres, Equity Premium Used in 2011 for the USA by Analysts, Companies and Professors: A Survey (July 8, 2011). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1898172 or http://dx.doi.org/10.2139/ssrn.1898172

Pablo Fernandez (Contact Author)

University of Navarra - IESE Business School ( email )

Camino del Cerro del Aguila 3
28023 Madrid
Spain
+34 91 357 0809 (Phone)
+34 91 357 2913 (Fax)

HOME PAGE: http://web.iese.edu/PabloFernandez/

Javier Aguirreamalloa

IESE Business School ( email )

08034 Barcelona
Spain

Luis Corres Avendaño

IESE ( email )

Camino del Cerro del Águila, 3
28023 Madrid, Madrid
Spain
656940704 (Phone)

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