Equity Risk Premiums (ERP): Determinants, Estimation and Implications - The 2023 Edition

Paper: SSRN 4398884

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 7.0/10
• Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: The paper employs sophisticated financial models (DCF, option pricing, risk decomposition) requiring advanced math, and its empirical component is data-heavy, featuring historical time-series analysis, implied premium calculations from market prices, and country-specific risk scores, making it backtest-ready despite lacking explicit code or GitHub links.

Research Flowchart

  flowchart TD
  A["Research Goal: Determine & Estimate Equity Risk Premiums for 2023"] --> B{"Data Inputs: Historical Market & Government Bond Returns"}
  B --> C["Methodology: Cross-Sectional & Time-Series Analysis"]
  C --> D["Computation: Discounted Cash Flow & Risk Models"]
  D --> E["Outcome 1: Estimated Equity Risk Premium for 2023"]
  D --> F["Outcome 2: Key Determinants of ERP Identified"]
  D --> G["Outcome 3: Implications for Investors & Valuation"]