Sentences with phrase «equity premium»

They point out that over the years, the size of the future equity premium has varied with the level of belief in its existence.

Recently, I investigated the effect of predicting equity premiums as opposed to stock returns.

Consequently, the historical equity premium was approximately 5 % per annum.

Many investors seek to capture higher equity premiums during more turbulent market periods.

The belief in a large equity premium led many to overweight stocks.

I defined each year's equity premium as the stock market return minus the return from commercial paper.

Notes starting November 23, 2006 Notes starting December 7, 2006 covered the following topics: Maintenance Stage Survey, Returns, Not Equity Premiums, Elements of Success, Time Needed to Assure a Gain, Time Needed Applications, The 4 % Shocker, Efficient Market Hypothesis, Dividend Growth Baselines, Research Project, Dividend Growth Rates, Yes, You Can Time the Market!

In the book Triumph of the Optimists, Elroy Dimson, Paul Marsh and Mike Staunton argue that the future equity premium in the U.S. is likely to be closer to 4 % over cash for two main reasons:

I re-ran the analysis that Michael and I did in our initial article, but I switched to the new capital market assumptions I use which allow for increasing bond yields over time while keeping a fixed average equity premium over bonds.

Estimating equity premiums does poorly.»

I totally agree with the point that if equity premium is 3 to 4 percent and you are paying 2.5 percent in fees and another 1 to 2 percent in performance chasing, tax leakage etc., you might as well buy GICs.

The minutes of the Fed's June meeting noted that «some participants suggested that increased risk tolerance among investors might be contributing to elevated asset prices more broadly; a few participants expressed concern that subdued market volatility, coupled with a low equity premium, could lead to a build - up of risks to financial stability.»

With current dividends yields historically low, expectations for slower earnings growth ahead, and lofty multiples, Arnott doubts a continuation of the past equity premium.

Maybe I'm double counting here, risk free rate plus full equity premium, but even at a 10.3 % return I don't think this investment would be attractive for me.

Calibrating bond returns to the January 2013 real yields offered on 5 - year TIPS, while maintaining the historical equity premium, causes the projected failure rate for retirement account withdrawals to jump to 57 %.

When everyone believes in the inevitability of stocks, à la «Dow 36,000» (we'll get there by 2025 or so), equity valuations are high, past equity performance has probably been great, and the future equity premium is small — think 1929, 1972, August 1987 and February 2000.

And that switch in which the — premium on the stock — the equity premium returns — could be a difficult one.

If the equity premium puzzle is real and not just luck, there is little reason to think that this generation or future generations will require less expected return for holding nondiversifiable equity risk.

I thought that you were treating the equity premium as the premium (if it exists) between equity shares sold by a firm and bonds sold by the same firm.

One possible source of the equity premium (meaning shares are more expensive to issue than bonds) is a central bank as lender of last resort - even in the absence of taxes, bankruptcy, etc..

It is the equity premium, the market premium and the risk premium.

Focuses in its concluding chapters on the historical equity premium and on an estimate for and implications of the future equity premium.

Neither the equity premium forecast nor the exchange rate forecast may be accurate.

That is, we provide strong empirical evidence for the existence of two option - implied components in the equity premium that contain non-redundant information, with the predictability stemming from the variance risk premium being far more short - lived than that of the correlation risk premium.

(To look back at other markets during this period, see The Bond Market: A Look Back, The Stock Market: A Look Back and Equity Premiums: Looking Back And Looking Ahead.)

The «equity premium» is also sometimes estimated by setting the stock return component to something like the dividend yield + 6.3 % and then subtracting the 10 - year Treasury yield.

On Friday, Alan Greenspan appeared on CNBC with the competing claim that «The basic way of looking at the degree of exuberance or non-exuberance is to take a look at what we call the «equity premium.»

For each strategy, he runs 10,000 Monte Carlo simulations of a 40 - year retirement based on historical annual distributions of 10 - year bond yield, equity premium, home appreciation, short - term interest rate and inflation rate.

This difference, which is called the «equity premium», reflects the higher amount of risk assumed when owning stocks.

And though I don't think the equity premium is high on average, I certainly prefer stocks to bonds here.

Even if the statistics are correct for how big the equity premium is, equity performance comes in lumps, and in the 80s and 90s, when we should have taken the returns of the fat years and squirreled them away for the eventual «lost decade,» instead, politicians increased benefits as if there was no tomorrow.

Partially out of a mistaken belief that the equity premium is large (how much do stocks earn on average versus cash), actuaries set earnings rates too high.

Easy, because it adopts two of my biases: Modern portfolio theory doesn't work, and the equity premium is near zero.

Buy and hold stems from the idea that equities outperform equities and fixed income by a wide margin (the «equity premium»), so one can always win by holding onto equities, and not ever switching into safer asset classes.

This book would also be valuable for academics and asset allocators wedded to Modern Portfolio Theory and a large value for the equity premium, though some would snipe at aspects of the presentation.

Glassman believed in 1999 that the equity premium was going to decline rapidly, possibly to zero, meaning stocks and bonds would have the same discount rate because they would finally be perceived to have the same risk.

Economists have suggested a whole range of variables that predict the equity premium: dividend price ratios, dividend yields, earnings - price ratios, dividend payout ratios, corporate or net issuing ratios, book - market ratios, beta premia, interest rates (in various guises), and consumption - based macroeconomic ratios (cay).

A track record of outperforming a benchmark or asset pricing model by an average of 2 % per year (net of fees) over the life of the fund would get the attention of many investors, especially when you consider that the equity premium might only be around 5 %.

This premium is called the equity premium.

How is the equity premium puzzle going to get resolved?

However, there are persuasive arguments that the value of the equity premium will be much lower going forward.

In short, though the academic studies rely on time - weighted rates of return for their conclusions regarding the equity premium, which represents buy - and - hold investors, dollar - weighted returns, which is what most investors actually receive on their investments, are lower.

So much for the equity premium in hindsight, but now it's time to begin committing funds to riskier assets.