The Equity Risk Premium: Essays and Explorations [NOOK Book]

Overview

What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive ...
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The Equity Risk Premium: Essays and Explorations

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Overview

What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive essays that explore critical issues and new research on the topic of stock market investing.
This book is aimed at all readers interested in understanding the empirical basis for the equity risk premium. Through the analysis and interpretation of two scholars whose research contributions have been key factors in the modern debate over stock market perfomance, this volume engages the reader in many of the key issues of importance to investors. How large is the premium? Is history a reliable guide to predict future equity returns? Does the equity and cash flows of the market? Are global equity markets different from those in the United States? Do emerging markets offer higher or lower equity risk premia? The authors use the historical performance of the world's stock markets to address these issues.
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Editorial Reviews

From the Publisher
"William Goetzmann and Roger Ibbotson have produced a searching and comprehensive analysis of how history reveals the forces that shape risk and return in the stock market. But HURRAH! their work is also eminently readable. All investors, economic historians, and financial academics should read this book—and hurry up about it."—Peter L. Bernstein, Publisher of Economics and Portfolio Strategy and Consulting Editor of The Journal of Portfolio Management

"Understanding the stock market is really about understanding the premium that investors demand for holding stocks over less risky assets. Not surprisingly, then, the 'equity premium puzzle' i.e., the seemingly inexplicably high historical excess returns on the stock market, has become a focus of extensive research and debate. To quote Goetzmann and Ibbotson, 'history matters,' and with the deceptively simple act of putting it together, they have shown us just how much it does and how much we can learn from the past. They have also staked their position firmly in the camp of those who believe that with careful statistical analysis of the historical record, and, in particular, with a clear understanding of the role of survivorship bias, the puzzle can be explained. Whatever prior views they may hold, both the professional and the interested amateur will learn much from this work."—Stephen A. Ross, Franco Modigliani Professor of Finance and Economics, MIT

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Product Details

  • ISBN-13: 9780199881970
  • Publisher: Oxford University Press, USA
  • Publication date: 10/18/2006
  • Sold by: Barnes & Noble
  • Format: eBook
  • File size: 14 MB
  • Note: This product may take a few minutes to download.

Meet the Author

Robert Ibbotson is an expert on capital market returns, cost of capital, and international investing. A member of the Yale School of Management faculty since 1986, he joined Yale from the University of Chicago, where he served as the director of the Center for Research in Security Prices (CRSP). He is Chairman and Founder of Ibbotson Associates in Chicago, New York, and Tokyo, which provides asset allocation advice, consulting, software, data, and financial publishing for financial institutions and investment advisors. He is also a Partner in Zebra Capital Management, LLC, which manages hedge funds. Professor Ibbotson is the author of numerous books and articles, including the annual Stocks, Bonds, Bills, and Inflation Yearbook.

Will Goetzmann is the Edwin J. Beinecke Professor of Finance and Management Studies at the Yale School of Management and a Research Associate of the National Bureau of Economic Research. He currently serves as the Director of the International Center for Finance at Yale, an interdisciplinary research organization focused on sponsoring and diseminating academic research in finance. He has taught at the Yale School of Management since 1994 and previously taught at Columbia Business School. He holds a B.A., an M.B.A., and a Ph.D. from Yale. An expert on a diverse range of investments, Will Goetzmann's research topics include the behavior of individual investors, global investing, financial market history, hedge funds, mutual funds, real estate, and art as an investment.

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Table of Contents

Introduction : opening remarks and motivation 3
1 History and the equity risk premium 25
2 Stocks, bonds, bills, and inflation : year-by-year historical returns (1926-1974) 41
3 A new historical database for the NYSE 1815 to 1925 : performance and predictability 73
4 The United States market wealth portfolio 107
5 World wealth : U.S. and foreign market values and returns 138
6 How to forecast long-run asset returns 175
7 The demand for capital market returns : a new equilibrium theory 184
8 The supply of capital market returns 201
9 Building the future from the past 212
10 Long-run stock returns : participating in the real economy 214
11 Stocks, bonds, bills, and inflation : simulations of the future (1976-2000) 237
12 Predictions of the past and forecasts for the future : 1976-2025 266
13 Short-horizon inputs and long-horizon portfolio choice 270
14 Survival 283
15 Survivorship bias in performance studies 307
16 Global stock markets in the 20th century 335
17 Re-emerging markets 365
18 The Dow theory : William Peter Hamilton's track record reconsidered 407
19 Patterns in three centuries of stock market prices 431
20 Bootstrapping tests of long-term stock market efficiency 454
21 Testing the predictive power of dividend yields 473
22 A longer look at dividend yields 494
23 Does asset allocation policy explain 40, 90, or 100 percent of performance? 521
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