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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Les H who wrote (179651)7/13/2002 10:35:03 PM
From: Les H  Read Replies (1) of 436258
 
Equity risk premium at 2 percent

nationalpost.com{40935726-67E7-4C81-B945-BB2A485C63CD}

Mercer's analysis is underpinned by three variables:

- It adjusted the P/E ratio to 25 from 46 (the level in 2001). That ratio translates into a 4% earnings yield.

- It assumes the growth rate in S&P 500 real earnings will be 2.8%.

- It assumes the dividend yield will be about 70%.

>>>Would think if one is going to move the P/E ratio back one year, one would also have to move back the expected growth rate to include the negative 50 percent growth rate of this year. It would take a quite a number of years of 2.8 percent growth to overcome that one negative year.
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