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Best Equity Risk Premium

| | Posted in: Equity Premium

What are the different ways of estimating the equity risk premium, and which one is best? In his March 2020 paper entitled "Equity Risk Premiums (ERP): Determinants, Estimation and Implications – The 2020 Edition", Aswath Damodaran updates a comprehensive overview of equity risk premium estimation and application. He examines why different approaches to estimating the premium disagree and how to choose among them. Using data from multiple countries (but focusing on the U.S.) over long periods through the end of 2019, he concludes that:

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