History and the Equity Risk Premium

19 Pages Posted: 12 Apr 2005  

Roger G. Ibbotson

Yale School of Management; Zebra Capital Management, LLC

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Date Written: April 6, 2005

Abstract

We summarize some of our own past findings and place them in the context of the historical development of the idea of the equity risk premium and its empirical measurement by financial economists. In particular, we focus on how the theory of compensation for investment risk developed in the 20th century in tandem with the empirical analysis of historical investment performance. Finally, we update our study of the historical performance of the New York Stock Exchange over the period 1792 to the present, and include a measure of the U.S. equity risk premium over more than two centuries. This last section is based upon indices constructed from individual stock and dividend data collected over a decade of research at the Yale School of Management, and contributions by other scholars.

Keywords: financial history, equity premium

JEL Classification: N2, G11

Suggested Citation

Ibbotson, Roger G. and Goetzmann, William N., History and the Equity Risk Premium (April 6, 2005). Yale ICF Working Paper No. 05-04. Available at SSRN: https://ssrn.com/abstract=702341

Roger G. Ibbotson

Yale School of Management ( email )

165 Whitney Avenue
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Zebra Capital Management, LLC ( email )

612 Wheelers Farms Road
Milford, CT 06461
United States

William N. Goetzmann (Contact Author)

Yale School of Management - International Center for Finance ( email )

165 Whitney Ave.
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)

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National Bureau of Economic Research (NBER)

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