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Views of Financial Economists on the Equity Premium and on Professional Controversies

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  • Ivo Welch

    (International Center for Finance)

Abstract

The consensus of 226 academic financial economists forecasts an arithmetic equity premium of 7% per year over 10 and 30 year horizons; and 6% to 7% over 1 and 5 year horizons. Pessimistic and optimistic 30-year scenario forecasts average 2% and 13%. Respondents claim to revise their forecast downward when the stock market rises. They perceive the profession's consensus to be higher than it really is and are influenced by this perception. There is agreement that markets are efficient and lack arbitrage opportunities, and that government intervention in financial markets is detrimental.

Suggested Citation

  • Ivo Welch, 2000. "Views of Financial Economists on the Equity Premium and on Professional Controversies," Yale School of Management Working Papers ysm122, Yale School of Management.
    • Handle: RePEc:ysm:somwrk:ysm122
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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