The equity premium in the long-run

Marco Taboga ()

Applied Financial Economics, 2004, vol. 14, issue 9, pages 645-650

Abstract: A new approach to the study of stock returns is proposed. A simple model is developed to show that, in the long run, the average rate of return on the market portfolio equals the average growth rate of income plus an average payout rate measuring the quantity of financial resources distributed or absorbed by quoted firms. This framework is exploited to calculate expected returns using US stock market data.

Date: 2004
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