The historical equity risk premium in Australia: post-GFC and 128 years of data

We present an updated set of estimates of the historical equity risk premium in Australia covering the 128 calendar years from January 1883 to December 2010. Relative to bonds (bills), the observed equity premium has averaged 6.1 per cent (6.5 per cent) p.a. over this period, and we report a similar...

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Published inAccounting and finance (Parkville) Vol. 52; no. 1; pp. 237 - 247
Main Authors Brailsford, Tim, Handley, John C., Maheswaran, Krishnan
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.03.2012
Accounting and Finance Association of Australia and New Zealand
SeriesAccounting and Finance
Subjects
Australia: Economic history
Capital
CAPM
Cost of capital
Equity risk premium
G100
G110
G310
Historical analysis
Inflation
Inflation Index Series
Risk
Risk premiums
Securities
Securities markets
Studies
Valuation
Australia
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Summary:We present an updated set of estimates of the historical equity risk premium in Australia covering the 128 calendar years from January 1883 to December 2010. Relative to bonds (bills), the observed equity premium has averaged 6.1 per cent (6.5 per cent) p.a. over this period, and we report a similar number for later periods of relatively good quality data. We also provide estimates that incorporate an adjustment for distributed imputation credits and include the annual time series of data relating to each of the underlying components – stock, bill and bond returns and inflation.
Bibliography:ArticleID:ACFI435
istex:D13F5385077CB3B30009DE098EA6DEC0935AB24D
ark:/67375/WNG-233362L6-5
Accounting and Finance, v.52, no.1, Mar 2012: (237)-247
We are grateful to the Australian Stock Exchange, Roger Hall of the Reserve Bank of Australia and Steve Whennan of the Australian Bureau of Statistics for the provision of data used in our earlier study and which are again used here. The views expressed in this study do not necessarily reflect the views of Morgan Stanley.
ISSN:0810-5391
1467-629X
DOI:10.1111/j.1467-629X.2011.00435.x