The Equity Premium
Top Cited Papers
- 1 April 2002
- journal article
- Published by Wiley in The Journal of Finance
- Vol. 57 (2) , 637-659
- https://doi.org/10.1111/1540-6261.00437
Abstract
We estimate the equity premium using dividend and earnings growth rates to measure the expected rate of capital gain. Our estimates for 1951 to 2000, 2.55 percent and 4.32 percent, are much lower than the equity premium produced by the average stock return, 7.43 percent. Our evidence suggests that the high average return for 1951 to 2000 is due to a decline in discount rates that produces a large unexpected capital gain. Our main conclusion is that the average stock return of the last half‐century is a lot higher than expected.Keywords
All Related Versions
This publication has 21 references indexed in Scilit:
- Dividend yields and expected stock returnsPublished by Elsevier ,2002
- Characteristics, Covariances, and Average Returns: 1929 to 1997The Journal of Finance, 2000
- The Shrinking Equity PremiumThe Journal of Portfolio Management, 1999
- Earnings and Expected ReturnsThe Journal of Finance, 1998
- Are Financial Analysts' Forecasts of Corporate Profits Rational?Journal of Political Economy, 1998
- Valuation Ratios and the Long-Run Stock Market OutlookThe Journal of Portfolio Management, 1998
- Permanent and Transitory Components of GNP and Stock PricesThe Quarterly Journal of Economics, 1994
- Movements in the Equity PremiumBrookings Papers on Economic Activity, 1993
- Business conditions and expected returns on stocks and bondsJournal of Financial Economics, 1989
- Unbiased Estimators of Long-Run Expected Rates of ReturnJournal of the American Statistical Association, 1974