Given the importance of equity risk premium, it is surprising how haphazard the estimation of equity risk premiums remains in practice.
This paper by Aswath Damodaran at the New York University Stern School of Business examines a number of different approaches to determining the equity risk premium and why different approaches yield different values. It closes by looking at how to choose the “right” number to use in analysis.
The paper can be downloaded here
equity, equity risk premium, research
Singapore’s two largest asset owners, GIC and Temasek, see attractive opportunities in climate adaptation solutions – a relatively underfunded area compared to decarbonisation. The former has already made selective adaptation investments and said the opportunity set across public and private debt and equity could increase to $9 trillion by 2050.
Academics from the London Business School, Boston College and Temple University, examine the outperformance of US public companies following corporate social responsibility engagement.
This paper commissioned by the Norwegian Ministry of Finance investigates the possibilities for the Government Pension Fund Global (GPFG) to profit from liquidity premiums in illiquid investments. It looks at the empirical evidence for the presence of liquidity effects in a broad range of asset classes: listed equities, corporate bonds, treasury and agency bonds, and
This research by academics at Tilburg University and the VU University Amsterdam, looks at the hurdles of implementing factor investing. It translates those into a checklist for implementing factor investing. The research, conducted for Robeco, finds that three approaches to factor investing are emerging and conducts case studies to examine how these approaches are implemented
This paper by MSCI creates a framework in order to answer the question: given a portfolio of managers, how does the active risk of each manager relate to the active risk of the portfolio? Asset owners often measure manager risk (the active risk of each manager) and have difficulty relating it to the contribution each
Using detailed data from IPD, this paper looks at the holdings and performance of 256 UK commercial real estate funds from 2002-2011. It concludes the more active funds, those further from benchmark holdings, outperform but are not accompanied by higher risk. To access the paper click here How active is your real estate fund
This paper by the Federal Reserve Bank of New York looks at the equity risk premium information from 20 models and estimates the ERP for various time periods. Extraordinarily it finds that the (preferred) estimator places the one-year equity premium in July 2013 at 14.5 percent, the highest level in 50 years and well above the
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