The equity risk premium: A solution?
نویسندگان
چکیده
منابع مشابه
Measuring the equity risk premium
We use surveys of economic forecasts to derive a forward-looking estimate of the US equity risk premium (ERP) relative to government bonds. Our ERP measure helps predict short-term relative returns between stocks and bonds. Over the period we studied, low readings of the ERP tended to adjust back to the mean via a rally in the bond market rather than a fall in stock prices. We do not generalise...
متن کاملA Bayesian solution to the equity premium puzzle
This paper describes a Bayesian solution to the equity premium puzzle, that is, the inability of standard intertemporal economic models to account for the magnitude of the observed excess return earned by a risky security over the return on T-bills. We follow convention and assume a single representative agent, but the main difference is that we suppose that the agent is not certain about the p...
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Estimates of the historical equity risk premium in the UK are in the range 7% to 9% per annum. Until recently, portfolio investors and industrialists have been encouraged to use a premium of this order in making investment decisions. The purpose of this paper is to review the risk premium debate and to re-inforce the case for rejecting historical experience in formulating future investment plan...
متن کاملThe Risk Premium for Equity: Explanations
The equity premium puzzle shows that using standard parameters and setup, the Consumption-based Capital Asset Pricing Model’s (CCAPM’s) prediction of the premium associated with systematic risk is out by an order of magnitude. The object of this paper is to consider the implications of each of the broad classes of explanations of the equity premium puzzle for resource allocation, welfare and po...
متن کاملUniversal Banking and the Equity Risk Premium
Did the unification of commercial and investment banking heighten risk in financial markets due to moral hazard of borrowers? In a simple intertemporal model with moral hazard and uninsured risk, we argue that if financial contracts are properly written, the integration in financial markets could give rise to greater risk sharing arrangement and could eliminate the equity risk premium attribute...
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ژورنال
عنوان ژورنال: Journal of Monetary Economics
سال: 1988
ISSN: 0304-3932
DOI: 10.1016/0304-3932(88)90173-0