Viewpoint: Estimating the equity premium
نویسندگان
چکیده
منابع مشابه
Estimating the Equity Premium
To estimate the equity premium, it is helpful to use finance theory: not the old-fashioned theory that efficient markets imply a constant equity premium, but theory that restricts the time-series behavior of valuation ratios, and that links the cross-section of stock prices to the level of the equity premium. Under plausible conditions, valuation ratios such as the dividend-price ratio should n...
متن کاملEstimating the Equity Premium
Existing empirical research investigating the size of the equity premium has largely consisted of a series of innovations around a common theme: producing a better estimate of the equity premium by using better data or a better estimation technique. The equity premium estimate that emerges from most of this work matches one moment of the data alone: the mean difference between an estimate of th...
متن کاملEstimating the Equity Premium
To estimate the equity premium, it is helpful to use finance theory: not the old-fashioned theory that efficient markets imply a constant equity premium, but theory that restricts the time-series behavior of valuation ratios, and that links the cross-section of stock prices to the level of the equity premium. Under plausible conditions, valuation ratios such as the dividend-price ratio should n...
متن کاملEstimating the Ex Ante Equity Premium
We find that the true ex ante equity premium very likely lies within 50 basis points of 3.5%. This estimate is similar to values obtained in some recent studies but is considerably more precise. In addition to narrowing the range of plausible ex ante equity premia, we also find that equity premium models that allow for time-variation, breaks, and/or trends are the models that best match the exp...
متن کاملThe Declining U.S. Equity Premium
This study demonstrates that the U.S. equity premium has declined significantly during the last three decades. The study calculates the equity premium using a variation of a formula in the classic Gordon stock valuation model. The calculation includes the bond yield, the stock dividend yield, and the expected dividend growth rate, which in this formulation can change over time. The study calcul...
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ژورنال
عنوان ژورنال: Canadian Journal of Economics/Revue canadienne d'économique
سال: 2008
ISSN: 0008-4085,1540-5982
DOI: 10.1111/j.1365-2966.2008.00453.x