EQUITY RISK PREMIUMS (ERP): DETERMINANTS, ESTIMATION AND IMPLICATIONS — THE 2012 EDITION

Aswath Damodaran
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Aswath Damodaran: Stern School of Business, USA

Chapter 12 in Managing and Measuring Risk:Emerging Global Standards and Regulations After the Financial Crisis, 2013, pp 343-455 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe following sections are included:Equity Risk Premiums: Importance and DeterminantsWhy Does the Equity Risk Premium Matter?A price for riskExpected returns and discount ratesInvestment and policy implicationsWhat are the Determinants of Equity Risk Premiums?Risk aversion and consumption preferencesEconomic riskInformationLiquidityCatastrophic riskGovernment policyThe behavioral/irrational componentThe Equity Risk Premium PuzzleEstimation ApproachesSurvey PremiumsInvestorsManagersAcademicsAcademicsEstimation questions and consequencesEstimates for the United StatesGlobal estimatesThe survivor biasHistorical Premium PlusSmall cap and other risk premiumsThe CAPM and market capitalizationThe Small Cap PremiumPerils of the approachCountry risk premiumsThe arguments for no country risk premiumThe arguments for a country risk premiumEstimating a Country Risk PremiumMeasuring Country RiskChoosing between the approachesImplied Equity PremiumsA Stable Growth DDM PremiumA Generalized Model: Implied Equity Risk PremiumImplied Equity Risk Premium: S&P 500Implied Equity Risk Premiums: Annual Estimates from 2008 to 2012A Term Structure for Equity Risk Premiums?Time Series Behavior for S&P 500 Implied PremiumImplied Equity Risk Premiums during a Market Crisis and BeyondDeterminants of Implied PremiumsImplied ERP and Interest ratesImplied ERP and Macroeconomic variablesImplied ERP, Earnings Yields and Dividend YieldsImplied ERP and Technical IndicatorsOther Equity MarketsSector premiumsFirm CharacteristicsChoosing an Equity Risk PremiumWhy Do the Approaches Yield Different Values?Which Approach is the “Best” Approach?Five Myths About Equity Risk PremiumsSummaryReferences

Keywords: Risk Management; Sovereign Risk; Systemic Risk; Liquidity; Credit Risk; Equity Risk Premium; Enterprise Risk Management (search for similar items in EconPapers)
Date: 2013
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