Market risk premium used in 2008 by Professors: A survey with 1,400 answers

Pablo Fernandez ()

No D/796, IESE Research Papers from IESE Business School

Abstract: The average Market Risk Premium (MRP) used in 2008 by professors in the United States (6.3%) was higher than the one used by their colleagues in Europe (5.3%). We also report statistics for 18 countries: the average MRP used in 2008 ranges from 4.1% (Belgium) to 10.5% (India). The dispersion of the MRP used was high: the average MRP used by professors of the same institution range was 3.5% and that of the same country was 6.9%. The average MRP used in 2007 was 1.5% lower than the one used in 2000. 15% of the professors decreased their MRP in 2008 (1.5% on average) and 24% increased it (2% on average). 66% of the professors used a lower MRP in 2007 than in 2000 (22% used a higher one). Most surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references that professors use to justify their MRP, and comments from 180 professors that illustrate the various interpretations of what is the required MRP and explain the confusion of students and practitioners about its concept and magnitude.

Keywords: equity premium puzzle; required equity premium; expected equity premium; historical equity premium (search for similar items in EconPapers)
JEL-codes: M21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa and nep-upt
Date: 2009-05-03
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Persistent link: http://EconPapers.repec.org/RePEc:ebg:iesewp:d-0796

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