This paper looks at the economic determinants of equity risk premiums, including investor risk aversion, information uncertainty and perceptions of macroeconomic risk. It also surveys two other approaches to estimating equity risk premiums rather than historical returns - the survey approach, where investors and managers ar asked to assess the risk premium and the implied approach, where a forward-looking estimate of the premium is estimated using either current equity prices or risk premiums in non-equity markets. It also look at the relationship between the equity risk premium and risk premiums in the bond market (default spreads) and in real estate (cap rates).
Equity Risk Premiums (ERP): Determinants, Estimation and Implications - A Post-Crisis Update
Length of Resource