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Are Stocks Cheap? A Review of the Evidence

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Abstract

We surveyed banks, we combed the academic literature, we asked economists at central banks. It turns out that most of their models predict that we will enjoy historically high excess returns for the S&P 500 for the next five years. But how do they reach this conclusion? Why is it that the equity premium is so high? And more importantly: Can we trust their models?

Suggested Citation

  • Fernando M. Duarte & Carlo Rosa, 2013. "Are Stocks Cheap? A Review of the Evidence," Liberty Street Economics 20130508, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86869
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    File URL: https://libertystreeteconomics.newyorkfed.org/2013/05/are-stocks-cheap-a-review-of-the-evidence.html
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    Cited by:

    1. Guangye Cao & Taeyoung Doh & Daniel Molling, 2015. "Should monetary policy monitor risk premiums in financial markets?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 7-30.
    2. Ewan Rankin & Muhummed Shah Idil, 2014. "A Century of Stock-Bond Correlations," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 67-74, September.
    3. J. Benson Durham, 2013. "More on U.S. Treasury term premiums: spot and expected measures," Staff Reports 658, Federal Reserve Bank of New York.
    4. Nicholas Apergis, 2019. "Financial Vulnerability And Income Inequality: New Evidence From Oecd Countries," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(3), pages 1-14, January.

    More about this item

    Keywords

    term structures; excess returns; stock returns; S&P 500; Treasury yield; Equity premium;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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