In the United States, a majority of households do not invest directly in equity despite the sizable historical equity premiums.
Clearly, the benchmark economy generates several key features of asset pricing observed in the data, such as high equity premiums, a low and stable risk-free interest rate, and a relatively volatile SR.
Households that do not participate in the equity market forgo the large equity premium.
The first analysis indicates that when households become less risk-averse, the model misses the calibration target, the equity premium, by a wide margin.
Mert Tarlan from UniCredit said in the last 2 to 3 years, the number of transactions has increased as equity premiums
came down and clients began paying attention not only to the value of the transaction but the value added as well.
M&A activity and private equity premiums
are topics that should be top of mind among investors at the CIBC World Markets Gaming and Lodging Conference in Boston July 12.
Mr Greenspan said the market value of assets has been rising faster than gross domestic product growth due to a significant decline in real equity premiums
and the decline in real long-term interest rates.
14) The total number of observations used for the computation of the 6-month and 12-month expected equity premiums are 558 and 531, respectively.
Implication 1 states that the expected equity premiums constructed from survey forecasts are unbiased forecasts of the actual equity premium in the model of Campbell and Cochrane (1999).
Also, it may be argued that the difference between the actual and expected equity premiums stems from economists' consideration of frictions in the market.
The authors argue that, by this metric at least, such utility functions may be very attractive to financial economists: they can generate substantial equity premiums
and, at the same time, make sensible predictions about attitudes toward monetary gambles.
Provided that earlier vintage CDOs continue to perform, the structuring fees, asset management fees and equity premiums
(less related debt service costs) from the CDOs are anticipated to provide sufficient capital generation to support the business on a going forward basis.