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A Scenario Analysis Of The Risk Premium In G7 Countries

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  • MOHAMMED OMRAN

    (Arab Academy for Science and Technology, College of Management and Technology, P.O. Box. 1029, Miami, Alexandria, Egypt;
    Cairo and Alexandria Stock Exchanges, 4 (A) El Sherifein St., Down Town, Postal Code 11513, P.O. Box 358, Mohammed Farid, Cairo, Egypt)

  • JOHN POINTON

    (Plymouth Business School, University of Plymouth, Drake Circus, Plymouth PL4 8AA, UK)

Abstract

In this investigation over 144,000 simulations are undertaken of country equity risk premia, based on a scenario analysis of the uncertainty surrounding the period of non-sustainable growth in earnings and stock returns. Final estimates, from the larger data-sets in Japan, the US and the UK, are around 3–6% in nominal terms, and compare well with other methodologies. However, except for Canada, the smaller data-sets in France, Germany and Italy reveal much higher risk premia than expected. Furthermore, given the spreads in estimates generally, the issue of sustainability is still contentious.

Suggested Citation

  • Mohammed Omran & John Pointon, 2008. "A Scenario Analysis Of The Risk Premium In G7 Countries," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(07), pages 673-689.
    • Handle: RePEc:wsi:ijtafx:v:11:y:2008:i:07:n:s0219024908004981
    DOI: 10.1142/S0219024908004981
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    Keywords

    Risk premium; growth; G7; earnings; returns;
    All these keywords.

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