The Equity Risk Premium: The Long-Run Future of the Stock Market

Book Description

The Equity Risk Premium-the difference between the rate of return on common stock and the return on government securities-has been widely recognized as the key to forecasting future returns on the stock market. Though relatively simple in theory, understanding and making practical use of the equity risk premium concept has been dauntingly complex-until now.

In The Equity Risk Premium, financial advisor, author, and scholar Bradford Cornell makes accessible for the first time an authoritative explanation of the equity risk premium and how it works in the real world. Step-by-step, his lucid, nontechnical presentation leads the reader to a new and more enlightened basis for making asset allocation choices.

Cornell begins his analysis by looking at the equity risk premium in the light of stock market history. He examines the use of historical data in estimating future stock market performance, including the historical relationship between stock returns and risk premium, the impact of survival bias, and the effect of long-horizon stock and bond returns. Using the stock market boom of the 1990s as a case study, Cornell demonstrates what equity risk premium analysis can tell us about whether stock prices are high or low, whether the stock market itself may have changed, and whether indeed a new economic paradigm of higher earnings and dividend growth is now in place.

Cornell analyzes forward-looking estimates of the equity risk premium through the lens of various competing approaches and assesses the relative merits of each. Among those scrutinized are the Discounted Cash Flow model, the Kaplan-Rubeck study, the Welch survey, and the Fama-French Aggregate IRR analysis. His insights on risk aversion theory, on the types of risk that have been rewarded over time, and on changing investor demographics all supply the sophisticated investor with important pieces of the risk premium puzzle.

In his invaluable summing up of the equity risk premium and the long-run outlook for common stocks, Cornell weighs the evidence and assays the impact of a lower equity risk premium in the future-and its profound implications for investments, corporate decision making, and retirement planning.

The product of years of serious analysis and hard-won insights, The Equity Risk Premium is essential reading for institutional investors, money managers, corporate financial officers, and all others who require a higher level of market analysis.

"The Equity Risk Premium plays a critical role in legal and regulatory matters related to corporate finance. Along with the cost of debt, it is the most important determinant of a company's cost of capital. As such, it is an integral part of the decision-making process in corporate finance. For instance, whether or not a major acquisition makes sense can depend on the assumed value of the equity risk premium. In addition, the equity risk premium is an issue that regulatory bodies consider when they set fair rates of return for regulated companies. Cornell's book is an important contribution because it includes both an historical analysis of the equity risk premium and provides tools for forecasting reasonable levels of the risk premium in the years ahead."-Theodore N. Miller, Partner, Sidley & Austin.

"Estimating how well stocks will do in the future from how well they have done in the past is like driving a car while looking in the rearview mirror. Brad Cornell provides us with an important forward-looking view in this easily understood guide to the equity risk premium and confounds the popular view that stocks will do well in the future because they have done well in the past."-Michael Brennan, Past President of the American Finance Association and Professor of Finance at the University of California at Los Angeles.

Customer Reviews:

Not rigorous or entertaining.......2007-03-02

This book was quite a disappointment and is very overpriced. If you have an academic background you will find it lacking in rigor. If you do not you may be fooled into the "illusion of understanding" but I would see that as a bad thing. Many people (myself included) read books on quantum physics or relativity for the layman just for enjoyment, and rationally seek the "illusion of understanding." This book does not rate highly in the "fun" scale. It is rather dry, and the subject matter itself is not as amusing as Schrodinger's cat or time travel. So I can only assume that non-academic readers really want to figure out how things really are, to trade their portfolios, and this book cannot satisfy that desire. This for two reasons: 1) researchers have not really solved the puzzles associated with the equity risk premium, 2) the non-technical reader cannot understand the subtleties of the subject matter. Given this, the "illusion of understanding" becomes a dangerous thing.

Save your $65 and buy some stocks for the long-run.

The Equity Risk Premium.......2002-02-09

The author, Professor Bradford Cornell, gives an analytical, yet very readable, explanation and forecast of the decline of the stock market during the past couple of years. In this regard Professor Cornell makes a similar conclusion about the value of equtiies and slightly earlier than did Robert J. Shiller in his book, Irrational Exuberance. It is unfortunate that Professor Cornell and his book did not get the same attention that was accorded to Professor Shiller at the start of the stock market decline.

The thesis of the book is that the equity risk premium for stocks, which is the compensation given to equity investors for holding shares of risky common stocks, was below, perhaps much below, what was historically normal. This implied that investors came to view common stocks as being a much less risky investment than stocks had been in the past. Indeed, a quite common view of many investors before the recent fall in the stock market was the view that common stock were an appropriate vehicle for "savings" rather than just for "investment." The implication of this perception by some investors is that equities in general were likely to continue to rise in price over time and thus represented a "safe" or at least low risk vehicle for discretionary income that was not spent.

However, periods of relative low perceived risk usually do not last and are followed by periods of relatively higher perceived risk. The current period we are now in appears to be one in which the uncertainties regarding the stock market have increased and thus investors are now demanding greater compensation, that is, a higher risk premium, for bearing those uncertainties.

The reason the book does not get five stars is that the book misspecifies the constant dividend growth model equation that forms the basis for the author's explanation of the adjustment in the equity risk premium. However, this oversight should not prevent the reader from getting a great explanation of how the prices of common stocks adjust to risks from this fine book.

Still don't understand the ERP puzzle.......2000-11-01

The real dillema regarding ERP is that the real ex-post ERP is irrationally different from the the ex-ante ERP required for CAPM valuations. Prof. Cornell does explore this issue well for a general audience. However, this book does not diminish my skepticism of CAPM equilibrium valuations and ex-ante ERP estimators.

Readable, Reasonalble, Rational.......2000-10-10

This book, with its many references, is a great guide to the academic literature on stock valuation. It was easy to read, very logical, and educational.

Detailed research, not targeted to a typical investor.......2000-08-06

The book seems to be targeted towards University researcher types more than people interested in learning about investing. If you are looking for a book that helps to explain how to value individual stocks for investment, skip this book.

There is a lot of detailed analysis of past history or stock market performance and other fundamentals. There is a comparison of dividend trends and lots of other stuff. Almost all of the book treats the entire market as a whole rather than analyzing individual stocks. I believe the conclusion of the book is that the stock market as a whole is over priced based on the extensive research performed by the author.

Book Description

If you have a passion for firearms and like to barter or dicker, your hobby can put cash in your pockets. Let longtime dealer Ryan Kephart coach you in the art of the trade and show you the ropes: getting started, ethics and etiquette, grading and assessment measures and more-all you need to get the most for your money.

Customer Reviews:

Rewarding reading for firearm collectors.......2001-02-08

Professional Gun Dealing is a complete and comprehensive instruction manual for buying, selling, and trading firearms for fun and profit. Ryan Kephart shows the reader how to get started, firearms trends, the ethnics involved in gun dealing, doing business by mail, working gun shows, financing a gun dealership, local and co-op advertising, and more. Practical, reliable, with a very highly recommended and accessible text, Professional Gun Dealing is ideal for the novice aspiring to become a gun dealer, and is informative, rewarding reading for firearm collectors as well.

Book Description

Every serious student of chemistry should try to develop a `feel' for the way molecules behave - for the way they are put together and especially for the rules of engagement which operate when molecules meet and react. This primer describes how stereoelectronic effects control this behaviour. It is the only concise text on this topic at an undergraduate level. This is an important subject area and the comprehensive yet concise coverage in this book shows students how to build up a powerful but simple way of thinking about chemistry.

Customer Reviews:

A good intro text.......2001-06-01

Kirby's Stereoelectronic effects provides a good introduction to the fundamentals of molecular orbital interactions. Makes a nice supplement to advanced organic chemistry texts that are deficient in this area

The Anomeric Effect and Associated Stereoelectronic Effects (Acs Symposium Series)

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The Anomeric Effect and Associated Stereoelectronic Effects (Acs Symposium Series)

Manufacturer: An American Chemical Society Publication
ProductGroup: Book
Binding: Hardcover

Biochemistry | Biological Sciences | Science | Subjects | Books

General & Reference | Chemistry | Science | Subjects | Books

Stereochemistry | Chemistry | Science | Subjects | Books

General | Science | Subjects | Books

Biochemistry | Basic Science | Medicine | Subjects | Books

Book Description

Discusses contemporary experimental and computational studies on the anomeric effect and related stereoelectronic effects and presents conflicting data and theories in this highly controversial area. Explores applications in carbohydrate chemistry, including enzymology, as well as organometallic chemistry and the chemistry of phosphates and sulfates. Includes examination of molecular modeling methods in compounds influenced by stereoelectronic effects.

Anomeric Effect and Related Stereoelectronic Effects at Oxygen (Reactivity and Structure)

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Anomeric Effect and Related Stereoelectronic Effects at Oxygen (Reactivity and Structure)
Anthony John Kirby
Manufacturer: Springer-Verlag
ProductGroup: Book
Binding: Hardcover

General & Reference | Chemistry | Science | Subjects | Books

Stereochemistry | Chemistry | Science | Subjects | Books

jp-unknown1 | Specialty Stores | Books
ASIN: 0387116842

Conformational Behavior of Six-Membered Rings: Analysis, Dyanmics, and Stereoelectronic Effects

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Conformational Behavior of Six-Membered Rings: Analysis, Dyanmics, and Stereoelectronic Effects
Eusebio Juaristi , and Edited by: E. Juaristi
Manufacturer: Wiley-VCH
ProductGroup: Book
Binding: Paperback

General | Science | Subjects | Books

General | Mathematics | Science | Subjects | Books

Book Description

The conformational analysis of six-membered carbocycles and heterocycles is a topic that hasn't been adequately reviewed in about ten years despite a wealth of exciting new developments in the field. The most recent literature on the subject is largely unavailable to the general reader because much of it is scattered in research publications in different areas of chemistry. This multiauthored volume, by international experts, will review the new information which is becoming increasingly important in the organic-, physical organic-, and biochemistry of understanding how conformational effects govern the shapes of molecules and their intermolecular interactions.

Conformational Behavior of Six-Membered Rings: Analysis, Dynamics, and Stereoelectronic Effects (Methods in Stereochemical Analaysis)

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Conformational Behavior of Six-Membered Rings: Analysis, Dynamics, and Stereoelectronic Effects (Methods in Stereochemical Analaysis)

Manufacturer: VCH Publishers
ProductGroup: Book
Binding: Hardcover

Biochemistry | Biological Sciences | Science | Subjects | Books

General & Reference | Chemistry | Science | Subjects | Books

Stereochemistry | Chemistry | Science | Subjects | Books

General | Science | Subjects | Books

Stereoelectronic Effects (Oxford Chemistry Primers, 36)

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Stereoelectronic Effects (Oxford Chemistry Primers, 36)
A. J. Kirby Anthony J. Kirby
Manufacturer: Oxford University Press, USA
ProductGroup: Book
Binding: Paperback
ASIN: B000OL6Z86

Stereoelectronic Effects in Organic Chemistry

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Stereoelectronic Effects in Organic Chemistry
Pierre Deslongchamps
Manufacturer: Elsevier Science Ltd
ProductGroup: Book
Binding: Paperback

The Anomeric Effect and Related Stereoelectronic Effects at Oxygen

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The Anomeric Effect and Related Stereoelectronic Effects at Oxygen

Manufacturer: Springer-Verlag Berlin and Heidelberg GmbH & Co. KG
ProductGroup: Book
Binding: Hardcover
ASIN: 3540116842

Book Description

Certain magnetic materials have optical properties that make them attractive for a wide variety of applications such as optical switches. This book describes the physics of one class of such magnetooptic materials, the insulating antiferromagnets. The authors summarize recent results concerning the structure, optical properties, spectroscopy, and magnetooptical properties of these materials. In particular, they consider magnetic phase transitions, symmetry effects, the linear magnetooptical effect, magnons, spectroscopic study of spin waves, photoinduced magnetic effects, and the effects of impurities.

Customer Reviews:

Fun!.......2003-11-27

The Hut in the Tree in the Woods is a highly entertaining book and is not a waste of time. This is the type of book that makes you laugh more then once. Richard M. Siddoway records what it was like to live with his trouble making cousin for a time. I recommend this book to any one who wants some laughs or a good, easy read.

Book Description

The period 1642-1651, one of the most turbulent in the history of mainland Britian, saw the country torn by civil wars. Focusing on the English and Welsh wars this book examines the causes, course and consequences of the conflicts. While offering a concise military account that assesses the wars in their national, regional and local contexts, Dr Gaunt provides a full appraisal of the severity of the wars and the true extent of the impact on civilian life, highlighting areas of continued historical debate. The personal experiences and biographies of key players are also included in this comprehensive and fascinating account.

Average customer rating:

Enlightening and Entertaining

An Awesome Easy Reader for Students

no title

every american needs to read this book!

Very clear

1001 Things Everyone Should Know About African American History
Jeffrey C. Stewart
Manufacturer: Gramercy
ProductGroup: Book
Binding: Hardcover

General | History | Bargain Books | Stores | Books
General | Sociology | Social Sciences | Nonfiction | Subjects | Books
African-American Studies | Special Groups | Social Sciences | Nonfiction | Subjects | Books
History | African Americans | United States | Americas | History | Subjects | Books
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Black Pioneers of Science and Invention

ASIN: 0517228408
Release Date: 2006-01-03

Book Description

Where can one go to get a comprehensive and entertaining account of the most significant events, individuals and social processes of African-American history? Fear not, because 1001 Things Everyone Should Know About African-American History is history at your fingertips-in a concise, accessible, easily-read format.

Jeffrey C. Stewart, Associate Professor of History at George Mason University, takes the reader on an all-encompassing journey through the entirety of African-American history that is pithy, provocative, and encyclopedic in scope. Here are all the people, terms, ideas, events, and social processes that make African-American history such a fascinating and inspiring subject.

1001 Things Everyone Should Know About African-American History covers all the significant information in six broad sections: Great Migrations; Civil Rights and Politics; Science, Inventions and Medicine; Sports; Military; Culture and Religion. It will entertain as well as instruct, and it can be read from beginning to end as well as opened at random and read at any length without confusion.

A necessary addition to every family's library, 1001 Things Everyone Should Know About African-American History presents African American history in a fun, engaging and intelligent way.

From the Trade Paperback edition.

Customer Reviews:

Enlightening and Entertaining.......2007-08-29

It's not easy to write a comprehensive history book that is also engaging and user-friendly. Author, historian, and professor Jeffrey Stewart found the way. In 1001 Things Everyone Should Know About African American History, he pens a concise yet encyclopedic narrative that highlights the people and events underlying the amazing story of African American history.

Stewart organizes his work around six sections: Gretat Migration, Civil Rights, Science, Sports, Military, and Religion. This is a book you can read cover to cover or one article at a time in any order.

Reviewer: Bob Kellemen, Ph.D., is the author of Beyond the Suffering: Embracing the Legacy of African American Soul Care and Spiritual Direction.

An Awesome Easy Reader for Students.......2006-03-09

This is a wonderful wealth of information written at a level that easily read and interpreted by students. It should become an addition to every classroom library.

no title.......2006-02-03

Took me absolutely forever to read this book - months! But I loved it and certainly learned a lot. Stewart is to be commended for pulling so much information together in a marvelously cohesive book. Prints and photographs are terrific. And for those who want more on the subject, and there is more, believe it or not, there is a black history calendar, a desk calendar, also chuck full of history and info.

every american needs to read this book!.......2002-12-16

I am so thankful Mr. Stewart wrote this book! It is a clear, conscise history that is in turns, overwhelming, sobering and inspiring. Although I was taught some of this in school, it did not have the impact of reading this history in short often 2 paragraph sections. It is a must read for american.

Very clear.......2001-01-25

I have taken class with Dr. Stewart at George Mason, and just like his lectures this book is very informative without being dull or overbearing. An excellent read!

1001 Things Everyone Should Know About African American History

Average customer rating:

1001 Things Everyone Should Know About African American History
Jeffrey C.; Doubleday Stewart
Manufacturer: Doubleday & Company
ProductGroup: Book
Binding: Hardcover
ASIN: B000J4HYWE

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1001 Things Everyone Should Know About African American History
Jeffrey C. Stewart
Manufacturer: Main Street Books
ProductGroup: Book
Binding: Hardcover
ASIN: B000RBW5I2

Customer Reviews:

a great read.......2003-11-17

in the spirit of "dealers of lightning", 3 degrees above zero tours a large corporate research laboratory with skill and clarity. by focusing on achievements and people, it navigates the large labs and really highlights interesting topics.

i'm a geek, but no engineer. however, i really found the writing to be clean and move along at a good pace. by talking to people who what got them into research, how they got to their topics, and why they do what they do, it's a fascinating look at a bright collection of minds and people.

written at the time that the labs were about to be spun off, everyone ends a chapter with comments on what they think will happen next. definitely interesting given the historical perspective you can now apply.

hunt this one down, i think you'll be pleased.

A Fine Record of a Legendary R & D outfit.......2001-03-13

The book paints an impressionistic picture of AT&T Bell Labs (pre-breakup), as viewed through the stories of several key players in its illustrious history. Written more as a family portrait than a strict history per se, the author successfully captures the flavour and the culture of this remarkable American R & D institution. Having been written in the shadow of the AT&T breakup, there is an undercurrent of concern over changing a proven winner throughout the book. Managers of any R & D organization would do well to read this and see how closely they can emulate this example.

Three Degrees Above Zero Bell Labs in the Information Age

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Three Degrees Above Zero Bell Labs in the Information Age
Jeremy Berstein
Manufacturer: Charles Scribner's Sons
ProductGroup: Book
Binding: Hardcover
ASIN: B000J0KRZE

Three Degrees above Zero: Bell Laboratories in the Information Age

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Three Degrees above Zero: Bell Laboratories in the Information Age
Jeremy Bernstein
Manufacturer: Cambridge University Press
ProductGroup: Book
Binding: Hardcover

General | Physics | Science | Subjects | Books

Book Description

Bell Laboratories is one of the worldâ€™s leading research centres. Bell scientists have won seven Nobel prizes in, physics, more than any other single institution in the world. In this engrossing book - a blend of popular science, and history -Jeremy Bernstein guides us on a fascinating tour of the labs, introducing us to the men and women who have been responsible for some of the greatest scientific advances of this century, in computers and computation, solid state physics (including the invention and development of the transistor); communications, and in astrophysics.

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Three Degrees Above Zero
Jeremy Bernstein
Manufacturer: Charles Scribner's Sons
ProductGroup: Book
Binding: Hardcover
ASIN: B000JVCWYC

Three Degrees Above Zero Bell Labs in the Information Age SIGNED

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Three Degrees Above Zero Bell Labs in the Information Age SIGNED
Berstein Jeremy
Manufacturer: Charles Scrbner Sons
ProductGroup: Book
Binding: Hardcover
ASIN: B000LC8UKE

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Coastal Marine Environmental Issues: An Extended Case Study for the Investigation and Evaluation of Marine Issues of the Gulf Coast and Florida Peninsula
Gerald Culen , Harold Hungerford , and Trudi Volk
Manufacturer: Stipes Pub Llc
ProductGroup: Book
Binding: Paperback

Conservation | Environment | Outdoors & Nature | Subjects | Books
General | Conservation | Outdoors & Nature | Subjects | Books
Reference | Outdoors & Nature | Subjects | Books
ASIN: 1588741370

Average customer rating:
Coastal Marine Environmental Issues: An Extended Case study for the Investigation and Evaluation of Marine Issues of the Gulf Coast and Florida Peninsula
Gerald Culen , Harold Hungerford , and Trudi Volk
Manufacturer: Stipes Publishing Co.
ProductGroup: Book
Binding: Spiral-bound
ASIN: 1588740269

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