@article {Zanella61, author = {Nicola Zanella}, title = {Dividend-Price Ratio and Interest Rate Movements: Explaining the Equity Risk Premium }, volume = {19}, number = {4}, pages = {61--71}, year = {2017}, doi = {10.3905/jwm.2017.19.4.061}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This article shows that, over time and across many countries, only a subset of long-term interest rate fall years is responsible for the high equity premium realized over the following periods. These are the years when the dividend-price ratio increases. This observed price behavior could be due to a tendency for prospective equity risk premium to increase when the interest rate declines. The reverse is true: Only a subset of interest rate rise years is responsible for the low or negative subsequent equity premium. These are the years when the dividend-price ratio decreases and the expected equity risk premium falls. This equity premium predictability is present at the international level over the 1971{\textendash}2014 period, and contrary to previous studies, it does not appear to be only a recessionary phenomenon.TOPICS: Fundamental equity analysis, analysis of individual factors/risk premia, global, performance measurement}, issn = {1534-7524}, URL = {https://jwm.pm-research.com/content/19/4/61}, eprint = {https://jwm.pm-research.com/content/19/4/61.full.pdf}, journal = {The Journal of Wealth Management} }