The Worldwide Equity Risk Premium

What is the state of the equity risk premium across global markets? In the October 2011 version of their paper entitled “Equity Premia Around the World”, Elroy Dimson, Paul Marsh, and Mike Staunton update their estimates of equity risk premiums for 19 country markets and a worldwide aggregate relative to both short-term government bills and long-term government bonds over a period of 111 years. They report local currency and dollar-based real returns and the historical equity premium for each country, and they decompose the premium into dividends, dividend growth, multiple expansion and change in real exchange rate. All aggregates are value-weighted. Using stock, bond, bill, inflation and currency returns for the period 1900 through 2010, they find that: (more…)