Please use this identifier to cite or link to this item:
Full metadata record
DC FieldValueLanguage
dc.contributor.authorSchröder, Daviden_US
dc.description.abstractA new approach of estimating a forward-looking equity risk premium(ERP) is to calculate the implied risk premium using present value (PV)formulas. This paper compares implied risk premia obtained from different PV models and evaluates them by analyzing their underlying firmspecific cost-of-capital estimates. It is shown that specific versions of dividend discount models (DDM) and residual income models (RIM) lead to similar ERP estimates. However, the results of cross-sectional regression tests of individual firm risk suggest that there are qualitative differences between both approaches. Expected firm risk obtained from the DDM is more in line with standard asset pricing models and performs better in predicting future stock returns than estimates from the RIM.en_US
dc.relation.ispartofseries|aBonn econ discussion papers |x2005,13en_US
dc.subject.keywordequity risk premiumen_US
dc.subject.keywordcost of capitalen_US
dc.subject.keywordexpected stock returnsen_US
dc.titleThe Implied Equity Risk Premium: An Evaluation of Empirical Methodsen_US
dc.typeWorking Paperen_US

Files in This Item:
380.03 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.