Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82071
Authors: 
Madsen, Jakob B.
Year of Publication: 
2003
Series/Report no.: 
EPRU Working Paper Series 2003-10
Abstract: 
Based on the Tobin’s q principle this paper shows that earnings per unit of capital and the output capital ratio are excellent measures of the required share returns because they are only temporarily affected by earnings shocks but are driven permanently by changes in required share returns. Evidence for the US over the period from 1889 to 2002 suggests that real required share returns and the equity risk premium climbed to extraordinarily high levels from the late 1930, to the end of the 1940s, and have since declined. The risk premium is currently somewhere between 4 and 6%.
Subjects: 
expected share returns
equity risk premium
Tobin’s q
share valuation
macroeconomic factors
JEL: 
G12
E22
E44
Document Type: 
Working Paper

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