The Market Risk Premium in Australia: Forward-Looking Evidence from the Options Market

Aspris, A; Felez Vinas, E; Foley, S; Malloch, H; Svec, J

The Market Risk Premium in Australia: Forward-Looking Evidence from the Options Market

Aspris, A Felez Vinas, E

Foley, S Malloch, H Svec, J

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Publisher:: Wiley
Publication Type:: Journal Article
Citation:: Accounting and Finance, 2024, 64, (4), pp. 3951-3972
Issue Date:: 2024

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Field	Value	Language
dc.contributor.author	Aspris, A
dc.contributor.author	Felez Vinas, E https://orcid.org/0000-0001-5795-7290
dc.contributor.author	Foley, S
dc.contributor.author	Malloch, H
dc.contributor.author	Svec, J
dc.date.accessioned	2024-12-16T03:00:26Z
dc.date.available	2024-12-16T03:00:26Z
dc.date.issued	2024
dc.identifier.citation	Accounting and Finance, 2024, 64, (4), pp. 3951-3972
dc.identifier.issn	0810-5391
dc.identifier.issn	1467-629X
dc.identifier.uri	http://hdl.handle.net/10453/182554
dc.description.abstract	This paper analyses forward-looking estimates of the expected market return in Australian. By utilising option prices, we compute a lower bound for the capital gain and dividend components of the expected return. Over a 17-year period, the average 1-month expected return lower bound is found to be 8.6% per annum, compared with an average realised return of 10.9% per annum. Our option-based estimates demonstrate significant predictive power beyond historical averages and enable direct measurement of the expected return term structure. This approach complements traditional measures of expected returns and offers valuable insights for practitioners, academics, and policymakers in Australia.
dc.language	English
dc.publisher	Wiley
dc.relation.ispartof	Accounting and Finance
dc.relation.isbasedon	10.1111/acfi.13288
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	1402 Applied Economics, 1501 Accounting, Auditing and Accountability, 1502 Banking, Finance and Investment
dc.subject.classification	Accounting
dc.subject.classification	3501 Accounting, auditing and accountability
dc.subject.classification	3502 Banking, finance and investment
dc.subject.classification	3801 Applied economics
dc.title	The Market Risk Premium in Australia: Forward-Looking Evidence from the Options Market
dc.type	Journal Article
utslib.citation.volume	64
utslib.for	1402 Applied Economics
utslib.for	1501 Accounting, Auditing and Accountability
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/Faculty of Business
pubs.organisational-group	University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	open_access	*
pubs.consider-herdc	true
dc.rights.license	This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0). To view a copy of this license, visit https://creativecommons.org/licenses/by-nc/4.0/
dc.date.updated	2024-12-16T03:00:24Z
pubs.issue	4
pubs.publication-status	Published
pubs.volume	64
utslib.citation.issue	4

Abstract:

This paper analyses forward-looking estimates of the expected market return in Australian. By utilising option prices, we compute a lower bound for the capital gain and dividend components of the expected return. Over a 17-year period, the average 1-month expected return lower bound is found to be 8.6% per annum, compared with an average realised return of 10.9% per annum. Our option-based estimates demonstrate significant predictive power beyond historical averages and enable direct measurement of the expected return term structure. This approach complements traditional measures of expected returns and offers valuable insights for practitioners, academics, and policymakers in Australia.

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http://hdl.handle.net/10453/182554