Snapshots of Decreased Equity Risk Premium: Estimation Based on Dividend-Equivalent Earnings

Quickly apply original, key PMR-published papers with Snapshots—a short article companion that distills PMR research into compressed, digestible takeaways, so you can put the paper’s core ideas to work in your investment process—fast. This Snapshot is based on an article about whether the equity risk premium has fallen over time. Using U.S. stock market data from 1871 to 2024 and a dividend-equivalent earnings approach, it argues that the required premium declined materially, especially in the 1980s, with major implications for stock valuations today.