The U.S. Risk Premium Campbell R. Harvey

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Presentation transcript:

The U.S. Risk Premium Campbell R. Harvey Duke University, Durham, NC USA National Bureau of Economic Research, Cambridge MA USA Cam.harvey@duke.edu +1 919.660.7768 office || +1 919.271.8156 mobile http://www.duke.edu/~charvey

U.S. Risk Premium Survey Background Graham/Harvey: Survey CFOs every quarter Q2 2000 through Q4 2005 (23 quarters) Current survey attracts about 400 respondents Why CFOs? We know from previous surveys and interviews that the CFOs use the risk premium for their capital budgeting Hence, they have thought hard about risk premium Should not be biased the way that analyst forecasts might be

U.S. Risk Premium Ten-Year Premium Ten-year risk premium is stable. Currently, about 2.4%

U.S. Risk Premium Ten-Year Premium Not related to PEs

U.S. Risk Premium Ten-Year Premium Linked to real yields

U.S. Risk Premium Ten-Year Premium Linked to VIX

U.S. Risk Premium Ten-Year Premium

U.S. Risk Premium One-Year Premium One-year risk premium quite variable. Currently, about 1.75%

U.S. Risk Premium One-Year Return One-year risk premium quite variable. Currently, about 5.5%

U.S. Risk Premium One-Year Return

U.S. Risk Premium Momentum in Expectations for 1-year Premium

U.S. Risk Premium Extreme Returns Cause Disagreement

U.S. Risk Premium Premium and Yield Curve

U.S. Risk Premium Premium and Quality Spread

U.S. Risk Premium Premium and ISM

U.S. Risk Premium Premium and ISM

U.S. Risk Premium Overconfidence

U.S. Risk Premium Overconfidence

U.S. Risk Premium Bias

U.S. Risk Premium Bias

U.S. Risk Premium Bias