The Equity Risk Premium Puzzle Revisited
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The Equity Risk Premium Puzzle Revisited
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Author : Andrew J. Vivian
language : en
Publisher:
Release Date : 2007
The Equity Risk Premium Puzzle Revisited written by Andrew J. Vivian and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Stock exchanges categories.
The Private Equity Premium Puzzle Revisited New Evidence On The Role Of Heterogeneous Risk Attitudes
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Author : Frank M. Fossen
language : en
Publisher:
Release Date : 2008
The Private Equity Premium Puzzle Revisited New Evidence On The Role Of Heterogeneous Risk Attitudes written by Frank M. Fossen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Revisiting The Equity Risk Premium
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Author : Laurence B. Siegel
language : en
Publisher: CFA Institute Research Foundation
Release Date : 2023-06-06
Revisiting The Equity Risk Premium written by Laurence B. Siegel and has been published by CFA Institute Research Foundation this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-06-06 with Business & Economics categories.
In 2001, Martin Leibowitz organized an Equity Risk Premium (ERP) Forum for CFA Institute, in which the participants discussed issues related to the ERP and made estimates for the future. This forum was repeated by Leibowitz, Brett Hammond, and Laurence Siegel in 2011, setting a precedent for a decennial forum. Siegel organized and moderated the discussion in 2021, and the proceedings from that event make up the current book. The participants in 2021 were (in alphabetical order) Robert Arnott, Clifford Asness, Mary Ida Compton, Elroy Dimson, William Goetzmann, Roger Ibbotson, Antti Ilmanen, Martin Leibowitz, Rajnish Mehra, Thomas Philips, and Jeremy Siegel. Each participant made a presentation, which was then discussed by the whole group. Finally, a roundtable discussion involving all of the participants was moderated by Laurence Siegel. Ibbotson and Dimson discussed historical returns in different countries. Ibbotson focused on the United States, while Dimson took a global industrial-country view. The history goes back almost a century (Ibbotson) or more than a century (Dimson), providing a look at how returns have evolved over a wide variety of conditions. Ibbotson also presented his method for making probabilistic forecasts of returns. Dimson, who is British, showed that “American exceptionalism” is one way to understand the results. Asness looked at the effectiveness of Robert Shiller’s CAPE (cyclically adjusted price-earnings ratio) valuation measure for forecasting. Valuations rose over the period he studied, and a lively discussion was had about why this may have occurred. Arnott focused on the growth rate of dividends, which has been very slow in per-share terms, and argued (with much debate from the other participants) that buybacks are only a partial substitute for dividends. Leibowitz, also looking at valuation as the lodestone of return forecasts, set forth a “growth adjustment” that brought his forecast in line with those made by others. Compton, a consultant to pension plans, discussed the challenges of communicating lower expected returns to clients. She also emphasized that expected returns “don’t always come true,” they’re just someone’s best forecast. Ilmanen broke up the expected return into its component parts: dividends, real growth, inflation, and so forth. Doing this, he said, allows one to debate the estimates for each part and ascertain how accurate each of the estimates is. Philips started by presenting a method for forecasting bond returns. He then turned to equities, for which he compared forecasts with subsequent realizations using a variety of forecast methods. Mehra discussed a number of issues related to the existence of premiums (equity risk, value, small cap, and so forth) and concluded that, although some of these are unstable, the ERP is highly stable. Jeremy Siegel advocated a “back to basics” approach using dividend and earnings yields, dividend and earnings growth rates, payout ratios, and price-to-earnings ratios. He emphasized that earnings can be calculated in a number of different way, and said that accounting practices have become more conservative over the years. Goetzmann concluded the session by reporting that one company, a water mill in France, had almost 600 years of historical return data and that an asset pricing model could be tested using those data. According to this model, the stock price is the present value of expected future dividends and is supported by the evidence. In sum, because of high valuations and low interest rates, the participants expect lower total returns in the future than in the past. A forward-looking ERP of 4% to 5% was the consensus of the group.
The Private Equity Premium Puzzle Revisited
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Author : Katya Kartashova
language : en
Publisher:
Release Date : 2011
The Private Equity Premium Puzzle Revisited written by Katya Kartashova and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Stocks categories.
The Equity Risk Premium
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Author : William N. Goetzmann
language : en
Publisher: Oxford University Press
Release Date : 2006-11-16
The Equity Risk Premium written by William N. Goetzmann and has been published by Oxford University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-11-16 with Business & Economics categories.
This book aims to create a strong understanding of the empirical basis for the equity risk premium. Through the research and anaylsis of two scholars who are experts in this field, this volume presents the key issues that are paramount to investors, including whether or not to use historical data as a method of equity investing, and can the equity premium reflect changes in fundamental values and cash flows of the market.
The Equity Risk Premium A Contextual Literature Review
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Author : Laurence B. Siegel
language : en
Publisher: CFA Institute Research Foundation
Release Date : 2017-12-08
The Equity Risk Premium A Contextual Literature Review written by Laurence B. Siegel and has been published by CFA Institute Research Foundation this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-12-08 with Business & Economics categories.
Research into the equity risk premium, often considered the most important number in finance, falls into three broad groupings. First, researchers have measured the margin by which equity total returns have exceeded fixed-income or cash returns over long historical periods and have projected this measure of the equity risk premium into the future. Second, the dividend discount model—or a variant of it, such as an earnings discount model—is used to estimate the future return on an equity index, and the fixed-income or cash yield is then subtracted to arrive at an equity risk premium expectation or forecast. Third, academics have used macroeconomic techniques to estimate what premium investors might rationally require for taking the risk of equities. Current thinking emphasizes the second, or dividend discount, approach and projects an equity risk premium centered on 3½% to 4%.
Revisiting The Market Risk Premium
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Author : James M. Sfiridis
language : en
Publisher:
Release Date : 2011
Revisiting The Market Risk Premium written by James M. Sfiridis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
Though the profound importance of the market risk premium to finance is unquestioned, its actual measurement has been problematic for both academics and analysts alike. What exactly is the magnitude of the ex post market risk premium? What is its relationship with the expected or ex ante premium? Though finance theory estimates an historical equity premium of 1-2%, simple arithmetic averaging of historical data gives a greater mean of 5-6%, an anomaly known as the equity premium puzzle. More recent findings provide a still greater equity premium point estimate. This paper explores the hypothesis that statistical misspecification of historical equity premium data may be an important contributing factor for such contradictions.
Private Equity Premium Puzzle Revisited February 2011
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Author : Bank of Canada
language : en
Publisher:
Release Date : 2011
Private Equity Premium Puzzle Revisited February 2011 written by Bank of Canada and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
The Equity Premium Puzzle
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Author : Rajnish Mehra
language : en
Publisher: Now Publishers Inc
Release Date : 2007-09-27
The Equity Premium Puzzle written by Rajnish Mehra and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-09-27 with Business & Economics categories.
Over two decades ago, Mehra and Prescott (1985) challenged the finance profession with a poser: the historical US equity premium is an order of magnitude greater than can be rationalized in the context of the standard neoclassical paradigm of financial economics. This regularity, dubbed "the equity premium puzzle," has spawned a plethora of research efforts to explain it away. In this review, the author takes a retrospective look at the original paper and explains the conclusion that the equity premium is not a premium for bearing non-diversifiable risk
The Forward Premium Puzzle Revisited
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Author : Guy Meredith
language : en
Publisher: International Monetary Fund
Release Date : 2002-02
The Forward Premium Puzzle Revisited written by Guy Meredith and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-02 with Business & Economics categories.
The forward premium is a notoriously poor predictor of exchange rate movements. This failure must reflect deviations from risk neutrality and/or rational expectations. In addition, a mechanism is needed that generates the appropriate correlation between the forward premium and shocks arising from risk premia or expectations errors. This paper extends McCallum (1994) to show how such a correlation can arise from the response of monetary policy to output and inflation, which are in turn affected by the exchange rate. The theoretical models considered all generate results that are consistent with the forward premium being a biased predictor of short-term exchange rate movements; the bias decreases, however, as the horizon of the exchange rate change lengthens. Another common feature of the models is that the true reduced-form equation for exchange rate changes contains variables other than the interest differential, providing a justification for "eclectic" relationships for forecasting exchange rates. The results, however, remain consistent with using uncovered interest parity as a building block for structural models.