The expected value premium |
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| Authors: | Long Chen Ralitsa Petkova Lu Zhang |
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| Affiliation: | 1. Eli Broad College of Business, Michigan State University, East Lansing, MI 48824, USA;2. Mays Business School, Texas A&M University, College Station, TX 77843, USA;3. Stephen M. Ross School of Business, University of Michigan, Ann Arbor, MI 48109, USA;4. NBER, USA |
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| Abstract: | Fama and French [2002. The equity premium. Journal of Finance 57, 637–659] estimate the equity premium using dividend growth rates to measure expected rates of capital gain. We apply their method to study the value premium. From 1945 to 2005, the expected value premium is on average 6.1% per annum, consisting of an expected dividend growth component of 4.4% and an expected dividend price ratio component of 1.7%. Unlike the equity premium, the value premium has been largely stable over the last half century. |
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| Keywords: | G12 G14 |
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