{'fraction_non_alphanumeric': 0.017793594306049824, 'fraction_numerical': 0.005931198102016607, 'mean_word_length': 4.9020979020979025, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Re-assessing the Equity Risk Premium

Estimates of the historical equity risk premium in the UK are in the range 7% to 9% per annum. Until recently, portfolio investors and industrialists have been encouraged to use a premium of this order in making investment decisions. The purpose of this paper is to review the risk premium debate and to re-inforce the case for rejecting historical experience in formulating future investment plans. A simulation of historical investor expectations suggests that a disciplined appraisal would have identified an average risk premium of less than 2% per annum. A forward-looking assessment of reasonable expectations suggests that a risk premium assumption of around 2.5% would be realistic at present. ACKNOWLEDGEMENT Thanks are due to Andy Adams for his useful comments on an earlier draft of this paper.