The Equity Premium

29 Pages Posted: 20 Jul 2000

See all articles by Eugene F. Fama

Eugene F. Fama

University of Chicago - Finance

Kenneth R. French

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2001


We estimate the equity premium using dividend and earnings growth rates to measure the expected rate of capital gain. Our estimates for 1951-2000, 2.55% and 4.32%, are much lower than the equity premium produced by the average stock return, 7.43%. Our evidence suggests that the high average return for 1951-2000 is due to a decline in discount rates that produces large unexpected capital gains. Our main conclusion is that the stock return of the last half-century is a lot higher than expected.

JEL Classification: G12

Suggested Citation

Fama, Eugene F. and French, Kenneth R., The Equity Premium (April 2001). Available at SSRN: or

Eugene F. Fama (Contact Author)

University of Chicago - Finance ( email )

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Kenneth R. French

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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