IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

A meta-analysis of the equity premium

  • Casper van Ewijk


  • Henri de Groot


  • C. Santing

The literature on the equity premium vigorously debates how to measure the premium, what is its size and what determines its variation. This study provides a quantitative survey of the literature through 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 in measurements by ex ante rather than ex post methods, in more recent periods, and in more developed countries. 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 156.

in new window

Date of creation: Aug 2010
Date of revision:
Handle: RePEc:cpb:discus:156
Contact details of provider: Postal:
Postbus 80510, 2508 GM Den Haag

Phone: (070) 338 33 80
Fax: (070) 338 33 50
Web page:

More information through EDIRC

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.:

as in new window
  1. 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.
  2. Kyriacos Kyriacou & Jakob B. Madsen & Bryan Mase, 2006. "Does inflation exaggerate the equity premium?," Journal of Economic Studies, Emerald Group Publishing, vol. 33(5), pages 344-356, November.
  3. John Y. Campbell & John H. Cochrane, 1994. "By force of habit: a consumption-based explanation of aggregate stock market behavior," Working Papers 94-17, Federal Reserve Bank of Philadelphia.
  4. James Claus, 2001. "Equity Premia as Low as Three Percent? Evidence from Analysts' Earnings Forecasts for Domestic and International Stock Markets," Journal of Finance, American Finance Association, vol. 56(5), pages 1629-1666, October.
  5. Fernandez, Pablo, 2009. "The equity premium in 150 textbooks," Journal of Financial Transformation, Capco Institute, vol. 27, pages 14-18.
  6. World Bank, 2006. "World Development Indicators 2006," World Bank Publications, The World Bank, number 8151.
  7. Shackman, Joshua D., 2006. "The equity premium and market integration: Evidence from international data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 155-179, April.
  8. John Y. Campbell, 2008. "Viewpoint: Estimating the equity premium," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 1-21, February.
  9. Andrew Vivian, 2007. "The UK Equity Premium: 1901-2004," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(9-10), pages 1496-1527.
  10. Kocherlakota, N., 1995. "The Equity Premium: It's Still a Puzzle," Working Papers 95-05, University of Iowa, Department of Economics.
  11. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
  12. Lettau, Martin & Ludvigson, Sydney & Wachter, Jessica, 2006. "The Declining Equity Premium: What Role Does Macroeconomic Risk Play?," CEPR Discussion Papers 5519, C.E.P.R. Discussion Papers.
  13. Fabio Canova & Gianni De Nicoló, 2003. "The Properties of the Equity Premium and the Risk-Free Rate: An Investigation Across Time and Countries," IMF Staff Papers, Palgrave Macmillan, vol. 50(2), pages 4.
  14. Roger G. Ibbotson & Peng Chen, 2003. "Long-Run Stock Returns: Participating in the Real Economy," Yale School of Management Working Papers ysm354, Yale School of Management.
  15. Philippe Weil, 1989. "The Equity Premium Puzzle and the Riskfree Rate Puzzle," NBER Working Papers 2829, National Bureau of Economic Research, Inc.
  16. Jakob B. Madsen, 2004. "The Equity Premium Puzzle and the Ex Post Bias," FRU Working Papers 2004/01, University of Copenhagen. Department of Economics. Finance Research Unit.
  17. Lemke, Wolfgang & Werner, Thomas, 2009. "The term structure of equity premia in an affine arbitrage-free model of bond and stock market dynamics," Working Paper Series 1045, European Central Bank.
  18. Abbas Mirakhor & S. Nuri Erbas, 2007. "The Equity Premium Puzzle, Ambiguity Aversion, and Institutional Quality," IMF Working Papers 07/230, International Monetary Fund.
  19. Ravi Jagannathan & Ellen R. McGrattan & Anna Scherbina, 2001. "The Declining U.S. Equity Premium," NBER Working Papers 8172, National Bureau of Economic Research, Inc.
  20. Brown, Stephen J & Goetzmann, William N & Ross, Stephen A, 1995. " Survival," Journal of Finance, American Finance Association, vol. 50(3), pages 853-73, July.
  21. Olivier J. Blanchard, 1993. "Movements in the Equity Premium," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 75-138.
  22. Siegel, Jeremy J., 1992. "The real rate of interest from 1800-1990 : A study of the U.S. and the U.K," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 227-252, April.
  23. De Santis Massimiliano, 2007. "Movements in the Equity Premium: Evidence from a Time-Varying VAR," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(4), pages 1-41, December.
  24. Fernandez, Pablo, 2009. "Market risk premium used in 2008 by Professors: A survey with 1,400 answers," IESE Research Papers D/796, IESE Business School.
  25. Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, vol. 54(3), pages 953-980, 06.
  26. Ville, Simon, 2006. "The Equity Premium Puzzle: Australia and the United States in Comparative Perspective," Economics Working Papers wp06-25, School of Economics, University of Wollongong, NSW, Australia.
  27. 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.
  28. Rajnish Mehra, 2003. "The Equity Premium: Why is it a Puzzle?," NBER Working Papers 9512, National Bureau of Economic Research, Inc.
  29. Robert J. Barro, 2005. "Rare Events and the Equity Premium," NBER Working Papers 11310, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Economic Logic blog
  2. Meta-Analysis in Economics

When requesting a correction, please mention this item's handle: RePEc:cpb:discus:156. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.