TY  - JOUR
AU  - Pastor,Lubos
AU  - Stambaugh,Robert F.
TI  - The Equity Premium and Structural Breaks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7778
PY  - 2000
Y2  - July 2000
UR  - http://www.nber.org/papers/w7778
L1  - http://www.nber.org/papers/w7778.pdf
N1  - Author contact info:
Lubos Pastor
University of Chicago
Booth School of Business
5807 South Woodlawn Ave
Chicago, IL  60637
Tel: 773/834-4080
Fax: NA
E-Mail: lubos.pastor@chicagobooth.edu

Robert F. Stambaugh
Finance Department
The Wharton School
University of Pennsylvania
Philadelphia, PA   19104-6367
Tel: 215/898-5734
Fax: 215/898-6200
E-Mail: stambaugh@wharton.upenn.edu
AB  - A long return history is useful in estimating the current equity premium even if the historical distribution has experienced structural breaks.  The long series helps not only if the timing of breaks is uncertain but also if one believes that large shifts in the premium are unlikely or that the premium is associated, in part, with volatility.  Our framework incorporates these features along with a belief that prices are likely to move opposite to contemporaneous shifts in the premium.  The estimated premium since 1834 fluctuates between four and six percent and exhibits its sharpest drop in the last decade.
ER  -