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IESE Business School

No D/911: Market risk premium used in 2010 by professors: A survey with 1,500 answers

Pablo Fernandez () and Javier del Campo
Additional contact information
Pablo Fernandez: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Javier del Campo: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN

Abstract: The average Market Risk Premium (MRP) used in 2010 by professors in the United States (6.0%) was higher than the one used by their colleagues in Europe (5.3%). We also report statistics for 33 countries: the average MRP used in 2010 ranges from 3.6% (Denmark) to 10.9% (Mexico). 29% of the professors decreased the MRP in 2010, 16% increased it and 55% used the same MRP. The dispersion of the MRP used was high: the average range of MRP used by professors for the same country was 7.4% and the average standard deviation was 2.4%. Most previous surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references that professors use to justify their MRP, and comments from 85 professors that illustrate the various interpretations of what is the required MRP.

Keywords: equity premium puzzle; required equity premium; expected equity premium; historical equity premium

JEL-codes: G12; G31; M21

25 pages, March 5, 2011

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DI-0911-E.pdf PDF-file

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