As to the equity premium, the 2008 decline in the stock market has made economists mildly more bullish about future stock market rates of return. Typical expected equity premia are between 5% and 6% per year.As to policy, the recommended fiscal stimulus is around $700 billion. A large majority...

Given the historically high equity premium, is it now a good time to invest in the stock market? Economists have suggested a whole range of variables that investors could or should use to predict: dividend price ratios, dividend yields, earnings-price ratios, dividend payout ratios, net issuing...

Cost-of-capital assessments with factor models require quantitative forward- looking estimates. We recommend estimating Vasicek-shrunk betas with one to four years of daily stock returns, and then — because the underlying betas are themselves time-varying — shrinking betas a second time (and...

How much of the historical 7%/year equity premium could have been risk compensation for disasters that just happened not to have occurred? The answer can be found in below-the-money put prices which would have protected against them. A premium beyond 2%/year (for rolling one-month-ahead...