Equity Premia as Low as Three Percent? Evidence from Analysts' Earnings Forecasts for Domestic and International Stock Markets

Journal of Finance - Tập 56 Số 5 - Trang 1629-1666 - 2001
James J. Claus, Jacob K. Thomas1
1Barclays Global Investors and Columbia Business School, respectively. We thank I/B/E/S Inc. for their database of earnings estimates and Enrique Arzac and René Stulz for many helpful suggestions and discussions. Useful comments were received from anonymous referees, Bala Dharan, Darin Clay, Ilia Dichev, Ben Esty, Bob Hodrick, Irene Karamanou, S.P. Kothari, Jimmy Liew, Jing Liu, Jim McKeown, Karl Muller, Jim Ohlson, Stephen Penman, Huai Zhang, and workshop participants at AAA annual meetings (San Diego), Columbia University, Copenhagen Business School, University of Michigan, Michigan State University, University of North Carolina-Chapel Hill, Northern Arizona University, Ohio State University, Penn State University, Prudential Securities Quantitative Conference, Syracuse University, and University of Texas-Austin.

Tóm tắt

ABSTRACTThe returns earned by U.S. equities since 1926 exceed estimates derived from theory, from other periods and markets, and from surveys of institutional investors. Rather than examine historic experience, we estimate the equity premium from the discount rate that equates market valuations with prevailing expectations of future flows. The accounting flows we project are isomorphic to projected dividends but use more available information and narrow the range of reasonable growth rates. For each year between 1985 and 1998, we find that the equity premium is around three percent (or less) in the United States and five other markets.

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Journal of Finance

Tập 56 Số 5

1629-1666

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