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TIME‐SERIES PROPERTIES OF THE EQUITY RISK PREMIUM
Author(s) -
Clinebell John M.,
Kahl Douglas R.,
Stevens Jerry L.
Publication year - 1994
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1994.tb00177.x
Subject(s) - proxy (statistics) , econometrics , autoregressive model , risk premium , equity premium puzzle , random walk , economics , equity (law) , series (stratigraphy) , statistics , mathematics , paleontology , political science , law , biology
In this paper we use time‐series models to investigate the presence of autoregression, random variation, and random walk movements of historic equity risk premiums. An autoregressive risk premium is found for 1926–58, but random variation around a much lower risk premium mean is found for 1959–90. This finding is not sensitive to holding‐period length, the choice of the risk‐free rate proxy, or January/July seasonal effects.