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Market risk premium used in 2010 by professors: A survey with 1,500 answers

Author

Listed:
  • Fernandez, Pablo

    (IESE Business School)

  • del Campo, Javier

    (IESE Business School)

Abstract

The average Market Risk Premium (MRP) used in 2010 by professors in the United States (6.0%) was higher than the one used by their colleagues in Europe (5.3%). We also report statistics for 33 countries: the average MRP used in 2010 ranges from 3.6% (Denmark) to 10.9% (Mexico). 29% of the professors decreased the MRP in 2010, 16% increased it and 55% used the same MRP. The dispersion of the MRP used was high: the average range of MRP used by professors for the same country was 7.4% and the average standard deviation was 2.4%. Most previous surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references that professors use to justify their MRP, and comments from 85 professors that illustrate the various interpretations of what is the required MRP.

Suggested Citation

  • Fernandez, Pablo & del Campo, Javier, 2011. "Market risk premium used in 2010 by professors: A survey with 1,500 answers," IESE Research Papers D/911, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0911
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    File URL: http://www.iese.edu/research/pdfs/DI-0911-E.pdf
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    Citations

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    Cited by:

    1. Fernández, Pablo & Aguirreamalloa, Javier & Corres, Luis, 2013. "Market Risk Premium Used in 82 Countries in 2012: A Survey with 7,192 Answers," IESE Research Papers D/1059, IESE Business School.
    2. Peter Cauwels & Didier Sornette, 2011. "Quis pendit ipsa pretia: facebook valuation and diagnostic of a bubble based on nonlinear demographic dynamics," Papers 1110.1319, arXiv.org, revised Nov 2011.
    3. Mark Freeman & Ben Groom, 2015. "Using equity premium survey data to estimate future wealth," Review of Quantitative Finance and Accounting, Springer, vol. 45(4), pages 665-693, November.
    4. Tetsuya Adachi & Takashi Asano & Tatsushi Okuda, 2016. "Simultaneous Estimation of Cost of Equity and Expected Earnings of Individual Firms with the Residual Income Model," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 34, pages 1-38, November.
    5. Tor Brunzell & Eva Liljeblom & Mika Vaihekoski, 2013. "Determinants of capital budgeting methods and hurdle rates in Nordic firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 85-110, March.
    6. Grzegorz Michalski, 2012. "Crisis Caused Changes In Intrinsic Liquidity Value In Non-Profit Institutions," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 7(2), pages 139-158, June.
    7. Fleten, Stein-Erik & Linnerud, Kristin & Molnár, Peter & Tandberg Nygaard, Maria, 2016. "Green electricity investment timing in practice: Real options or net present value?," Energy, Elsevier, vol. 116(P1), pages 498-506.
    8. Grzegorz Michalski & Aleksander Mercik, 2013. "Polish and Silesian Non-Profit Organizations Liquidity Strategies," Papers 1301.3825, arXiv.org.

    More about this item

    Keywords

    equity premium puzzle; required equity premium; expected equity premium; historical equity premium;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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