Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2010-08-23 Number: 10-078/3 Author-Name: Casper van Ewijk Author-Workplace-Name: CPB Netherlands Bureau for Economic Policy Analysis, The Hague, and University of Amsterdam Author-Name: Henri L.F. de Groot Author-Workplace-Name: CPB Netherlands Bureau for Economic Policy Analysis, The Hague, and VU University Amsterdam Author-Name: Coos Santing Author-Workplace-Name: Ministry of Finance, The Hague Title: A Meta-Analysis of the Equity Premium Abstract: The equity premium is a key parameter in asset allocation policies. There is a vigorous debate in the literature regarding the actual measurement of the equity premium, its size and the determinants of its variation. This study aims to take stock of this literature by means of 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 if measured by ex ante methods rather than ex post, in more recent periods, and for more developed countries. In addition, 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.
Published in 'Journal of Empirical Finance'. Classification-JEL: D53, E44, G12, N20 Keywords: equity premium, meta-analysis File-Url: http://papers.tinbergen.nl/10078.pdf File-Format: application/pdf File-Size: 507278 bytes Handle: RePEc:tin:wpaper:20100078