A meta-analysis of the equity premium

We identify how the size of the equity premium depends on the way it is measured, along with its evolution over time and its variation across regions in the world.

We find that the equity premium is significantly lower in measurements by ex ante rather than ex post methods, in more recent periods, and in more developed countries. Looking at the underlying fundamentals, we find that larger volatility in GDP growth tends to raise the equity premium, while a higher nominal interest rate has a negative impact on the equity premium.