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Market risk premium used in 2010 by analysts and companies: A survey with 2.400 answers

Author

Listed:
  • Fernandez, Pablo

    (IESE Business School)

  • del Campo, Javier

    (IESE Business School)

Abstract

The average MRP used by analysts in the United States and Canada (5.1%) was similar to the one used by their colleagues in Europe (5.0%), and United Kingdom (5.2%). But the average MRP used by companies in the United States and Canada (5.3%) was smaller than the one used by companies in Europe (5.7%), and United Kingdom (5.6%). The dispersion of the MRP used was high, but lower than that of the MRP used by professors: the average range of MRP used by analysts (companies) for the same country was 5.7% (4.1%) and the average standard deviation was 1.7% (1.2%). These statistics were 7.4% and 2.4% for the professors. Most previous surveys have been interested in the Expected MRP, but this survey asks about the Required MRP. The paper also contains the references that analysts and companies use to justify their MRP, and comments from 89 respondents that illustrate the various interpretations of what is the required MRP.

Suggested Citation

  • Fernandez, Pablo & del Campo, Javier, 2011. "Market risk premium used in 2010 by analysts and companies: A survey with 2.400 answers," IESE Research Papers D/912, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0912
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    File URL: http://www.iese.edu/research/pdfs/DI-0912-E.pdf
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    Citations

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    Cited by:

    1. Fernández, Pablo & Aguirreamalloa, Javier & Corres, Luis, 2013. "Market Risk Premium Used in 82 Countries in 2012: A Survey with 7,192 Answers," IESE Research Papers D/1059, IESE Business School.
    2. Tor Brunzell & Eva Liljeblom & Mika Vaihekoski, 2013. "Determinants of capital budgeting methods and hurdle rates in Nordic firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 85-110, March.
    3. Peter Cauwels & Didier Sornette, 2011. "Quis pendit ipsa pretia: facebook valuation and diagnostic of a bubble based on nonlinear demographic dynamics," Papers 1110.1319, arXiv.org, revised Nov 2011.
    4. Piotr Szymański, 2012. "Problems in business valuation –analysis of survey results," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(44), pages 137-162, June.
    5. Péter Benczúr & Gábor Kátay & Áron Kiss, 2012. "Assessing changes of the Hungarian tax and transfer system: A general-equilibrium microsimulation approach," MNB Working Papers 2012/7, Magyar Nemzeti Bank (Central Bank of Hungary).
    6. Tetsuya Adachi & Takashi Asano & Tatsushi Okuda, 2016. "Simultaneous Estimation of Cost of Equity and Expected Earnings of Individual Firms with the Residual Income Model," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 34, pages 1-38, November.
    7. Grzegorz Michalski, 2012. "Crisis Caused Changes In Intrinsic Liquidity Value In Non-Profit Institutions," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 7(2), pages 139-158, June.
    8. Fleten, Stein-Erik & Linnerud, Kristin & Molnár, Peter & Tandberg Nygaard, Maria, 2016. "Green electricity investment timing in practice: Real options or net present value?," Energy, Elsevier, vol. 116(P1), pages 498-506.
    9. Peter Cauwels, Didier Sornette, "undated". "Quis pendit ipsa pretia: facebook valuation and diagnostic of a bubble based on nonlinear demographic dynamics," Working Papers ETH-RC-11-007, ETH Zurich, Chair of Systems Design.

    More about this item

    Keywords

    market risk premium; required equity premium; expected equity premium; historical equity premium;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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