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Estimating the Equity Premium

John Campbell ()

Scholarly Articles from Harvard University Department of Economics

Abstract: Finance theory restricts the time-series behaviour of valuation ratios and links the cross-section of stock prices to the level of the equity premium. This can be used to strengthen the evidence for predictability in stock returns. Steady-state valuation models are useful predictors of stock returns, given the persistence in valuation ratios. A steady-state approach suggests that the world geometric average equity premium fell considerably in the late twentieth century, rose modestly in the early years of the twenty-first century, and was almost 4% at the end of March 2007.

Date: 2008
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Published in Canadian Journal of Economics

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Working Paper: Estimating the Equity Premium (2007) Downloads
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