The dynamics of U.S. equity risk premia: lessons from professionals'view
Semi-annual surveys carried out by J. Livingston on a panel of experts have enabled us to compute the expected returns over the time span 1-semester and 2-semesters ahead on a portfolio made up of US industrial stocks. We calculated about 3000 individual ex-ante equity risk premia over the period 1952 to 1993 (82 semesters) defined as the difference between these expected stock returns and the risk-free forward rate given by zero coupon bonds. Unlike any other study, our contribution is to analyse premia deduced from surveys data, at the micro level, per date and over a long period. Three main conclusions may be drawn from our analysis of these ex-ante premia. First, the mean values of these premia are closer to the predictions derived from the consumption-based asset pricing theory than the ones obtained for the ex-post premia. Second, the experts' professional affiliation appears to be a significant criterion in discriminating premia. Third, in accordance with the Arbitrage Pricing Theory, individual ex-ante premia depend both on macroeconomic and idiosyncratic common factors: the former are represented by a set of macroeconomic variables observable by all agents, and the latter by experts’ personal forecasts about the future state of the economy, as defined by expected inflation and industrial production growth rate.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: 200 Avenue de la République, Bât. G - 92001 Nanterre Cedex|
Web page: http://economix.fr
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:drm:wpaper:2009-25. 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: (Valérie Mignon)
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.