The U.S. Equity Return Premium: Past, Present and Future

Preprint
Publisher Website
Google Scholar
  • 1 January 2008
    • preprint
      • Published in RePEc
Abstract
For more than a century, diversified long-horizon investments in America's stock market have consistently received much higher returns than investors in bonds: a return gap averaging 6 percent per year. An enormous amount of creative and ingenious work by a great many economists has gone into seeking explanations for the so-called "equity premium return puzzle," but so far without a fully satisfactory answer. We first review the facts about the equity premium and then discuss a range of explanations that have been proposed. We conclude that the equity premium puzzle has not been solved: it remains a puzzle. And we anticipate that the equity return premium will continue, albeit at a smaller level than in the past--perhaps four percent per year.

This publication has 0 references indexed in Scilit: