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The U.S. Risk Premium

The U.S. Risk Premium. Campbell R. Harvey, Ph.D., Professor, Duke University http://www.duke.edu/~charvey. U.S. Risk Premium Survey Background. Graham/Harvey: Survey CFOs every quarter Q2 2000 through Q3 2002 (ten quarters) Current survey attracts about 400 respondents Why CFOs?

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The U.S. Risk Premium

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  1. The U.S. Risk Premium Campbell R. Harvey, Ph.D., Professor, Duke University http://www.duke.edu/~charvey

  2. U.S. Risk PremiumSurvey Background • Graham/Harvey: Survey CFOs every quarter • Q2 2000 through Q3 2002 (ten 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

  3. U.S. Risk PremiumOne-Year Premium • One-year risk premium quite variable. Currently, about 3%

  4. U.S. Risk PremiumTen-Year Premium • Ten-year risk premium is stable. Currently, about 4%

  5. U.S. Risk PremiumAsymmetry • CFOs believe the downside is much more likely than the upside

  6. U.S. Risk PremiumConfidence Intervals: September 16, 2002

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