The realized equity premium has been higher than expected: further evidence
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.
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, 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.
- G. Constantinides, 1990. "Habit formation: a resolution of the equity premium puzzle," Levine's Working Paper Archive 1397, David K. Levine.
- 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.
- Peter A. Diamond, 1999. "What Stock Market Returns To Expect For The Future?," Issues in Brief ib-2, Center for Retirement Research.
- John H Cochrane, 2003.
"Where is the Market Going: Uncertain Facts and Novel Theories,"
Levine's Working Paper Archive
618897000000000762, David K. Levine.
- 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.
- John H. Cochrane, 1998. "Where is the Market Going? Uncertain Facts and Novel Theories," NBER Working Papers 6207, National Bureau of Economic Research, Inc.
- Mehra, Rajnish & Prescott, Edward C., 1985.
"The equity premium: A puzzle,"
Journal of Monetary Economics,
Elsevier, vol. 15(2), pages 145-161, March.
- Jeremy J. Siegel & Richard H. Thaler, 1997. "Anomalies: The Equity Premium Puzzle," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 191-200, Winter.
- Rajnish Mehra, 2003. "The Equity Premium: Why is it a Puzzle?," NBER Working Papers 9512, National Bureau of Economic Research, Inc.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0210004. 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: (EconWPA)
If references are entirely missing, you can add them using this form.