The key question is whether the recent decline in equity premiums is permanent or temporary.
Some analysts have offered an entirely different interpretation of the drop in equity premiums.
According to this argument, much, possibly all, of the decline in equity premiums over the past five years reflects this learning response.
If the equity premium has endured for seven decades, the reasoning goes, the best guess is that it will endure for many more.
The risk premium for equities is also called the equity premium.
They also showed how this model could explain some feature of asset prices, such as the equity premium.
In other words, the equity premium may be a partial predictor of future stock returns and even the future growth of the economy.
Other countries' markets displayed lower long-run returns (but still with positive equity premiums).
Two broad classes of market failure have been considered as explanations of the equity premium.
The magnitude of the equity premium has implications for resource allocation, social welfare, and economic policy.
