Where do we come up with the idea that stocks “should” provide returns substantially greater than bonds?
What are the factors that determine the expected future return of stocks as compared to bonds?
The answers to these questions are at the core of studies into the equity risk premium (ERP) and the CFA Institute has recently published a book of essays written by ERP thought leaders titled, “Rethinking The Equity Risk Premium”. This book is available in digital format (Adobe PDF) at no cost (or for $0.99 at the Amazon e-bookstore if you want a copy for your e-reader). The content is dense–this book is 164 pages long. The list of contributors to the volume is impressive and the writing is outstanding, which makes the book a rare “must read” for investment advisors and policy makers. Continue reading