The Expected Return on Risky Assets: International Long-run Evidence

Dmitry Kuvshinov and Kaspar Zimmermann

No 15610, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper estimates the expected return on equity and housing for 17 advanced economies between years 1870 and 2015. We show that the expected risky return has been in steady decline, but its trend is markedly different to that in the safe rate. As a consequence, the ex ante risk premium exhibits large secular movements, and risk premia and safe rates are strongly negatively correlated. Our findings suggest that time-varying risk appetite is a key driver of expected risky and safe returns - not only in the short, but also in the long run.

Keywords: Expected returns; Risk premia; Real interest rates; Return predictability; Long-run trends (search for similar items in EconPapers)
JEL-codes: E43 E44 G12 G15 N20 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-his, nep-mac, nep-ore, nep-rmg and nep-upt
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Citations: View citations in EconPapers (4)

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