This code updates the measure of equity risk premium.
We use the dividend-price ratio, cay and the three-month T-bill to predict future excess returns
- Haddad Valentin, Erik Loualiche, and Matthew Plosser: Buyout Activity: the Impact of Aggregate Discount Rates; Journal of Finance, February 2017, 72:1
- Download the paper
- Download the data
- Measuring Dividend Price ratio uses CRSP Monthly Index files available on WRDS
msi.sas7bdatdownloaded from/wrds/crsp/sasdata/a_stock/msi.sas7bdat- See the calculations to account for reinvested dividends in this note on how
- Measuring the risk-free rate from H15 release available on FRED
- Measuring cay from Lettau's website. Last downloaded on March 23rd 2020
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Future Excess Returns
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D/P ratio 3.370***
(0.436)
cay 1.814***
(0.246)
T-bill (three-month) -1.246***
(0.163)
Constant 0.011
(0.013)
Observations 264
R2 0.344
F Statistic 45.459*** (df = 3; 260)
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Notes: ***Significant at the 1 percent level.
**Significant at the 5 percent level.
*Significant at the 10 percent level.