An Econometric Model for Estimating the Equity Risk Premium

In this paper we estimate the relation between the equity risk premium and the fundamental macroeconomic and financial variables in the United States during the period 1964-2012 by applying the standard OLS regression and the Hodrick-Prescott filter. Consequently, based on these results and applying...

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Bibliographic Details
Published in:Procedia economics and finance 2014, Vol.10, p.185-189
Main Authors: Rădulescu, Andrei, Pele, Daniel Traian
Format: Article
Language:English
Subjects:
ARIMA
equity risk premiun
fundamentals
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Summary:In this paper we estimate the relation between the equity risk premium and the fundamental macroeconomic and financial variables in the United States during the period 1964-2012 by applying the standard OLS regression and the Hodrick-Prescott filter. Consequently, based on these results and applying the ARIMA models we forecast the evolution of the equity risk premium in the United States for the period 2013-2016. According to our results the equity risk premium in the United States is going to gradual increase in the following years, an evolution determined by the FED monetary policy perspectives, but also by the narrowing of the private consumption gap.
ISSN:2212-5671
2212-5671
DOI:10.1016/S2212-5671(14)00292-5