TY - JOUR
T1 - A Meta-Analysis of the Equity Premium
AU - de Groot, H.L.F.
AU - van Ewijk, C.
AU - Santing, C.
PY - 2012
Y1 - 2012
N2 - 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. © 2012 Elsevier B.V.
AB - 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. © 2012 Elsevier B.V.
U2 - 10.1016/j.jempfin.2012.07.002
DO - 10.1016/j.jempfin.2012.07.002
M3 - Article
SN - 0927-5398
VL - 19
SP - 819
EP - 830
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
IS - 5
ER -