What are the different ways of estimating the equity risk premium, and which one is best? In his March 2026 paper entitled "Equity Risk Premiums (ERP): Determinants, Estimation, and Implications – The 2026 Edition", Aswath Damodaran updates a comprehensive overview of equity risk premium estimation. 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 2025, he concludes that:
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