Market Risk Premium and Risk-Free Rate Used for 69 Countries in 2019: A Survey

Fernández, Pablo; Martínez, Mar; Acín, Isabel Fernández

doi:10.2139/ssrn.3358901

Cited by 14 publications

(16 citation statements)

References 21 publications

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“…In addition to the aforementioned studies of Welch (2000), Graham and Harvey (2001) and Choi and Robertson (2019), there are a few surveys which are methodologically similar to ours. Fernandez et al (2019) Overall, our response rate (ca. 11%) compares well with similar studies.…”

Section: Other Expert Surveysmentioning

confidence: 91%

Are bank capital requirements optimally set? Evidence from researchers’ views

Ambrocio

Hasan

Jokivuolle

et al. 2020

Journal of Financial Stability

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We survey 149 leading academic researchers on bank capital regulation. The median (average) respondent prefers a 10% (15%) minimum non-risk-weighted equity-to-assets ratio, which is considerably higher than the current requirement. North Americans prefer a significantly higher equity-to-assets ratio than Europeans. We find substantial support for the new forms of regulation introduced in Basel III, such as liquidity requirements. Views are most dispersed regarding the use of hybrid assets and bail-inable debt in capital regulation. 70% of experts would support an additional market-based capital requirement. When investigating factors driving capital requirement preferences, we find that the typical expert believes a five percentage points increase in capital requirements would "probably decrease" both the likelihood and social cost of a crisis with "minimal to no change" to loan volumes and economic activity. The best predictor of capital requirement preference is how strongly an expert believes that higher capital requirements would increase the cost of bank lending.

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Section: Other Expert Surveysmentioning

confidence: 91%

Are bank capital requirements optimally set? Evidence from researchers’ views

Ambrocio

Hasan

Jokivuolle

et al. 2020

Journal of Financial Stability

View full text Add to dashboard Cite

show abstract

“…According to the previously mentioned AFP survey, about 49% of companies base their investment strategy on an estimated value between 5% and 6%, 23% of them on a value between 3% and 4%, and 17% of them on a value of 7% or greater. As pointed out by Fernandez et al (2019) and Damodaran (2018), the term equity risk premium can be used for different concepts, specifically:…”

Section: Literature Reviewmentioning

confidence: 99%

“…The Expected Equity Premium (EEP), 1 namely the expected return differential between stocks and government bonds. Expectations are usually calculated using surveys, such as those carried out by: Fernandez et al (2019) for the period 2008-2018 for over 500 companies and professionals estimating a EEP of 5.4% -5.7% in the US; Graham and Harvey (2018) for the period 2000-2018 among SP500 Chief Financial Officers (CFOs), obtaining an average EEP of 4.42% in the US; Welch (2008) with more than 400 answers from finance and economics professors, estimating an average EEP of 6% in the US. 3.…”

Section: Literature Reviewmentioning

confidence: 99%

Persistence in the market risk premium: evidence across countries

2020

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This paper provides evidence on the degree of persistence of one of the key components of the CAPM, namely the market risk premium, as well as its volatility. The analysis applies fractional integration methods to data for the US, Germany and Japan, and for robustness purposes considers different time horizons (2, 5 and 10 years) and frequencies (monthly and weekly). The empirical findings in most cases imply that the market risk premium is a highly persistent variable which can be characterized as a random walk process, whilst its volatility is less persistent and exhibits stationary long-memory behaviour. There is also evidence that in the case of the US the degree of persistence has changed as a results of various events; this is confirmed by both endogenous break tests and the associated subsample estimates. Market participants should take this evidence into account when designing their investment strategies.

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“…A survey of 2394 reported numbers for the risk premia for the U.S. indicates a range between 2.5% and 15.8% with an average of 5.7% (Fernandez et al (2013)).…”

Section: Sizementioning

confidence: 99%

Asset Pricing with Endogenous State-Dependent Risk Aversion

Ouysse

2020

SSRN Journal

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We present an economy where aggregate risk aversion is stochastic and state-dependent in response to information about the wider economy. A factor model is used to link aggregate risk aversion to the business cycle and to handle high-dimensionality of the information about the economy. Our estimated aggregate risk aversion is counter-cyclical and varies with news about economic booms and busts. We find new evidence of volatility clustering of risk aversion around recessions. In addition to the price of consumption risk associated with consumption risk, time variation in risk aversion introduces risk preferences as a new component of the risk premium.

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Market Risk Premium and Risk-Free Rate Used for 69 Countries in 2019: A Survey

Cited by 14 publications

References 21 publications

Are bank capital requirements optimally set? Evidence from researchers’ views

Are bank capital requirements optimally set? Evidence from researchers’ views

Persistence in the market risk premium: evidence across countries

Asset Pricing with Endogenous State-Dependent Risk Aversion

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