The realized equity premium has been higher than expected: further evidence

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The realized equity premium has been higher than expected: further evidence

Author Info

Marco Taboga (CeRP)

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Marco Taboga

Abstract

We propose a new approach to the study of stock returns. We develop a simple model to show that, in the long run, the average rate of return on the market portfolio equals the average growth rate of income plus an average payout rate measuring the quantity of financial resources distributed or absorbed by quoted firms. We exploit this framework to calculate expected returns using U.S. stock market data.

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Paper provided by EconWPA in its series Finance with number 0210004.

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Date of creation: 17 Oct 2002
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Handle: RePEc:wpa:wuwpfi:0210004

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Paper
- Marco Taboga, 2002. "The Realized Equity Premium has been Higher than Expected: Further Evidence," CeRP Working Papers 29, Center for Research on Pensions and Welfare Policies, Turin (Italy). [Downloadable!]

Find related papers by JEL classification:
G - Financial Economics

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-10-23 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Constantinides, George M & Duffie, Darrell, 1996. "Asset Pricing with Heterogeneous Consumers," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 219-40, April. [Downloadable!] (restricted)
Other versions:
- Constantinides,George & Duffie,Darrel, 1992. "Asset pricing with heterogeneous consumers," Discussion Paper Serie A 381, University of Bonn, Germany.
Eugene F. Fama & Kenneth R. French, 2002. "The Equity Premium," Journal of Finance, American Finance Association, vol. 57(2), pages 637-659, 04. [Downloadable!] (restricted)
Other versions:
- Eugene Fama & F. & Kenneth R. French, . "The Equity Premium."," CRSP working papers 522, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March. [Downloadable!] (restricted)
Siegel, Jeremy J & Thaler, Richard H, 1997. "Anomalies: The Equity Premium Puzzle," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 191-200, Winter. [Downloadable!] (restricted)
John H. Cochrane, 1998. "Where is the Market Going? Uncertain Facts and Novel Theories," NBER Working Papers 6207, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- John H Cochrane, 2003. "Where is the Market Going: Uncertain Facts and Novel Theories," Levine's Working Paper Archive 618897000000000762, David K. Levine. [Downloadable!]
- John H. Cochrane, 1997. "Where is the market going? Uncertain facts and novel theories," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 3-37. [Downloadable!]
Peter A. Diamond, 2003. "What Stock Market Returns To Expect For The Future?," Issues in Brief ib-2, Center for Retirement Research. [Downloadable!]
Rajnish Mehra, 2003. "The Equity Premium: Why is it a Puzzle?," NBER Working Papers 9512, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-43, June. [Downloadable!] (restricted)
Haitao Li & Yuewu Xu, 2002. "Survival Bias and the Equity Premium Puzzle," Journal of Finance, American Finance Association, vol. 57(5), pages 1981-1995, October. [Downloadable!] (restricted)

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