MEASURING THE MARKET RISK PREMIUM E(rm) - rf USING HISTORICAL DATA Vanguard 500 Index Fund (symbol: VFINX) minus Treasury Bills April 1987 - August 2006 All measurements relate to monthly returns on SP500, rmt, and the Treasury bill rate it Average monthly risk premium Methodological note: I have used the St. Louis FRED Annualized risk premium data for 3-month Treasury Bills; this data is Annualized risk free rate annualized, and I have divided it by 12 to get the monthly returns. Since the data can be taken as an ex-ante return, the April 1987 rate is attributed to May 1987. Treasury bill rate Market risk premium I've use 3-month instead of 1-month, because there are lots of data problems with the latter. Date 1-Apr-87 1-May-87 1-Jun-87 1-Jul-87 3-Aug-87 1-Sep-87 1-Oct-87 2-Nov-87 1-Dec-87 Price 17.32 17.49 18.37 19.28 20.02 19.56 15.31 14.06 15.12 Return 1% 5% 5% 4% -2% -28% -9% 7% 4% 0.47% 0.47% 0.47% 0.47% 0.50% 0.53% 0.51% 0.47% MEASURING THE MARKET RISK PREMIUM E(rm) - rf USING HISTORICAL DATA Vanguard 500 Index Fund (symbol: VFINX) minus Treasury Bills April 1987 - August 2006 All measurements relate to monthly returns on SP500, rmt, and the Treasury bill rate it Average monthly risk premium Methodological note: I have used the St. Louis FRED Annualized risk premium data for 3-month Treasury Bills; this data is Annualized risk free rate annualized, and I have divided it by 12 to get the monthly returns. Since the data can be taken as an ex-ante return, the April 1987 rate is attributed to May 1987. Treasury bill rate Market risk premium I've use 3-month instead of 1-month, because there are lots of data problems with the latter. Date 1-Apr-87 1-May-87 1-Jun-87 1-Jul-87 3-Aug-87 1-Sep-87 1-Oct-87 2-Nov-87 1-Dec-87 Price 17.32 17.49 18.37 19.28 20.02 19.56 15.31 14.06 15.12 Return 1% 5% 5% 4% -2% -28% -9% 7% 4% 0.47% 0.47% 0.47% 0.47% 0.50% 0.53% 0.51% 0.47%