I have posted Podcast #162 to the “RobCasts” section of the site. It’s called I Was Wrong: There Is No Equity Risk Premium.
The conventional idea is that stock returns are determined by market forces, that stock investors are being compensated for their willingness to take on risk. No. Stock returns are determined by economic realities — it is the productivity of the U.S. economy that determines the long-term stock return. There is no dickering involved here. Stock investors would be paid the same long-term return whether they were willing to take on risk or not. Or at least so says Rob Bennett in October of 2009.