COOKIES: By using this website you agree that we can place Google Analytics Cookies on your device for performance monitoring. |
University of Cambridge > Talks.cam > Financial History Seminar > The Disappearing Equity Risk Premium on the 1920s NYSE
The Disappearing Equity Risk Premium on the 1920s NYSEAdd to your list(s) Download to your calendar using vCal
If you have a question about this talk, please contact D'Maris Coffman. The NYSE boom of the 1920s ended with the infamous crash of October 1929 and subsequent collapse in common stock prices from 1929-1932. Most approaches have suggested an overvaluation of 100%, usually dating from mid-1927 to September 1929. Excessive speculation based on high real earnings growth rates from 1921-8, amid a euphoric “new age” for the US economy, has been given as the cause. However, the 1920s witnessed the emergence of new ideas emanating from new research on the long-term returns to common stocks (Smith, 1924). The research identified a large premium on common stocks held over the long term compared to corporate bonds. This, in turn led to the formation of new investment vehicles that aimed to hold diversified stock portfolios over the long run in order to earn the large equity risk premium. Whilst such an approach was capable of earning substantial excess returns over bonds, new ideas derived from the research led to a change in stock valuations. The paper reconstructs fundamental values of NYSE stocks from long run dividend growth and stock volatility data, and demonstrates why such a change in theoretical values was unjustified. Investors switched to valuing stocks according to a new theory, which ignored compensation for stock return volatility, which made up the Equity Risk Premium (ERP). This talk is part of the Financial History Seminar series. This talk is included in these lists:
Note that ex-directory lists are not shown. |
Other listsNanoDTC Talks Cambridge University Franco-British Student Alliance Lennard-Jones Lecture 2017 Maritime and Oceanic History Graduate Workshop Perspectives in Nano Information Processing Engineers Without Borders Panel TalksOther talksArt and Migration Designer Babies or Children of Frankenstein? Genome Editing and its Side Effects HONORARY FELLOWS PRIZE LECTURE - Towards a silent aircraft Laser Printed Organic Electronics, Metal-Organic Framework - Polymer Nanofiber Composites for Gas Separation The Partition of India and Migration MEASUREMENT SYSTEMS AND INSTRUMENTATION IN THE OIL AND GAS INDUSTRY Cyclic Peptides: Building Blocks for Supramolecular Designs Migration in Science Immigration and Freedom The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age Cambridge-Lausanne Workshop 2018 - Day 1 Undersampling in physical imaging inverse problems |