Equity Risk Premiums

Equity Risk Premiums (ERP): Determinants, Estimation and Implications – The 2013 Edition ArXiv ID: ssrn-2238064 “View on arXiv” Authors: Unknown Abstract Equity risk premiums are a central component of every risk and return model in finance and are a key input in estimating costs of equity and capital in both cor Keywords: Equity Risk Premiums, Cost of Equity, Risk and Return Models, Capital Budgeting, Corporate Finance, Equity Complexity vs Empirical Score Math Complexity: 5.0/10 Empirical Rigor: 3.0/10 Quadrant: Lab Rats Why: The paper discusses theoretical risk-return models (like CAPM and multi-factor models) which involve mathematical formulas, but the excerpt shows conceptual explanation rather than dense derivations. Empirical rigor is low as it focuses on conceptual discussions, historical data limitations, and forward-looking estimates without providing backtesting, code, or implementation-heavy datasets. flowchart TD A["Research Goal Determine & estimate the Equity Risk Premium (ERP) for corporate finance & valuation"] --> B["Key Inputs & Data • Historical Market Returns (Equity & Bonds) • Implied ERP from Valuation Models • Macroeconomic Factors (Inflation, Interest Rates)"] B --> C["Methodology 1. Historical Approach 2. Forward-Looking/Implied ERP 3. Macroeconomic Determinants"] C --> D["Computational Process • Estimate Historical ERP • Forecast future ERP • Adjust for risk & macro conditions"] D --> E["Key Findings & Outcomes • ERP varies over time (not constant) • Influenced by macroeconomic factors • Crucial for Cost of Equity & Capital Budgeting"]

Equity Risk Premiums (ERP): Determinants, Estimation and Implications – The 2015 Edition ArXiv ID: ssrn-2581517 “View on arXiv” Authors: Unknown Abstract Equity risk premiums are a central component of every risk and return model in finance and are a key input in estimating costs of equity and capital in both cor Keywords: Equity Risk Premiums, Cost of Equity, Risk and Return Models, Capital Budgeting, Corporate Finance, Equity Complexity vs Empirical Score Math Complexity: 6.0/10 Empirical Rigor: 4.0/10 Quadrant: Lab Rats Why: The paper introduces advanced financial models like CAPM and multi-factor models with formulas, indicating moderate math complexity. However, it focuses on conceptual frameworks and theoretical estimation approaches (historical, survey, implied) without providing specific backtests, code, or detailed empirical datasets. flowchart TD A["Research Goal: Determine ERP"] --> B{"Methodology & Inputs"}; B --> C["Data: Historical Market Returns Risk-Free Rate Implied ERP from Valuation"]; B --> D["Model: DCF & Risk Models"]; C --> E{"Computational Process"}; D --> E; E --> F["Estimate Base ERP + Adjust for Risk Factors"]; E --> G["Forward-Looking Analysis vs. Historical Averages"]; F --> H["Key Outcomes"]; G --> H; H --> I["2015 ERP Estimate 5.5% - 6.5%"]; H --> J["Implications for: Cost of Equity & Capital"];