The Market Risk Premium: Expectational Estimates Using Analysts' Forecasts

Journal of Applied Finance, Vol. 11, 2001

Posted: 6 Nov 2001

See all articles by Robert S. Harris

Robert S. Harris

University of Virginia - Darden School of Business

Felicia C. Marston

University of Virginia - McIntire School of Commerce

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Abstract

Using expectational data from financial analysts, we estimate a market risk premium for US stocks. Using the S&P 500 as a proxy for the market portfolio, the average market risk premium is found to be 7.14% above yields on long-term US government bonds over the period 1982-1998. This risk premium varies over time; much of this variation can be explained by either the level of interest rates or readily available forward-looking proxies for risk. The market risk premium appears to move inversely with government interest rates suggesting that required returns on stocks are more stable than interest rates themselves.

JEL Classification: G31, G12

Suggested Citation

Harris, Robert S. and Marston, Felicia C., The Market Risk Premium: Expectational Estimates Using Analysts' Forecasts. Journal of Applied Finance, Vol. 11, 2001, Available at SSRN: https://ssrn.com/abstract=285557

Robert S. Harris (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

Felicia C. Marston

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
804-924-1417 (Phone)

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