Risk Premium and Risk Price in the Equity MarketRisk

Prime de risque et prix du risque sur les actions

René Garcia and Nour Meddahi
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Nour Meddahi: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: The equity premium measures the return obtained by investing in equities in excess of a short-term Treasury bill return. In the last thirty years, the financial literature has proposed various risk models to rationalize the magnitude of this premium, which amounts to an annual 6 % to 8 % for most industrialized countries for the post-war period. We review the various models and explain their increased complexity to capture not only the mean premium but also its variability, its predictability at various horizons and its term structure.

Date: 2019
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Published in Revue d'économie financière, 2019, Le prix du risque, 133, pp.199-211. ⟨10.3917/ecofi.133.0199⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02894794

DOI: 10.3917/ecofi.133.0199

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