West Loop Financial LLCHas The Realized Equity Premium Been Shrinking? – West Loop Financial LLC https://www.westloopfinancial.com Evolutionize Site Wed, 19 Aug 2020 20:50:49 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 Has The Realized Equity Premium Been Shrinking? https://www.westloopfinancial.com/2014/06/23/has-the-realized-equity-premium-been-shrinking/ https://www.westloopfinancial.com/2014/06/23/has-the-realized-equity-premium-been-shrinking/#respond Mon, 23 Jun 2014 15:20:00 +0000 http://evolvemypractice.com/?p=1053 Tying up our two-part series on premiums, today we’ll explore the equity premium. Claude Erb has done a series of papers in which he examines the various premiums – size, value, momentum, and beta – and found that there’s a demonstrable trend in each case of the premiums shrinking in terms of realized returns. His April...

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]]> Tying up our two-part series on premiums, today we’ll explore the equity premium.

Claude Erb has done a series of papers in which he examines the various premiums – size, value, momentum, and beta – and found that there’s a demonstrable trend in each case of the premiums shrinking in terms of realized returns. His April 2014 paper, “The Incredible Shrinking Realized Equity Risk Premium,” focused specifically on the equity risk premium.

To create a trend line Erb used a three-step process:

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