A meta-analysis of the equity premium
Casper Ewijk (),
Henri de Groot () and
Santing, A.J. (Coos)
Journal of Empirical Finance, 2012, vol. 19, issue 5, 819-830
The equity premium is a key parameter in asset allocation policies. There is a vigorous debate in the literature regarding the actual measurement of the equity premium, its size and the determinants of its variation. This study aims to take stock of this literature by means of a meta-analysis. We identify how the size of the equity premium depends on the way it is measured, along with its evolution over time and its variation across regions in the world. We find that the equity premium is significantly lower if measured by ex ante methods rather than ex post, in more recent periods, and for more developed countries. In addition, looking at the underlying fundamentals, we find that larger volatility in GDP growth tends to raise the equity premium while a higher nominal interest rate has a negative impact on the equity premium.
Keywords: Equity premium; Meta-analysis; Asset allocation policy; Spatial and temporal variation; Price for risk (search for similar items in EconPapers)
JEL-codes: D53 E44 G12 N20 (search for similar items in EconPapers)
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Working Paper: A meta-analysis of the equity premium (2010)
Working Paper: A Meta-Analysis of the Equity Premium (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:19:y:2012:i:5:p:819-830
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