9 stock and interest payments to bonds are reinvested and that there are no taxes paid. This long-term perspective underscores the remarkable wealth building potential of the equity premium.It should come as no surprise therefore,that the equity premium is of central importance in portfolio allocation decisions,estimates of the cost of capital and is front and cen- ter in the current debate about the advantages of investing Social Security funds in the stock market. In Table 4 we report the premium for some interesting sub-periods:1889-1933,when the United States was on a gold standard;1933-2000,when it was off the gold standard;and 1946-2000,the postwar period.Table 5 presents 30 year moving averages,similar to those re- ported by the US meteorological service to document'normal'temperature. Table4 Equity Premium in Different Sub-Periods Time Period real return real return on a relatively %equity pre- on a market riskless security mium index Mean Mean Mean 1889-1933 7.01 3.09 3.92 19342000 8.76 -0.17 8.93 1946-2000 9.03 0.68 8.36 Source:Mehra and Prescott(1985).Updated by the authors.9 stock and interest payments to bonds are reinvested and that there are no taxes paid. This long-term perspective underscores the remarkable wealth building potential of the equity premium. It should come as no surprise therefore, that the equity premium is of central importance in portfolio allocation decisions, estimates of the cost of capital and is front and cen￾ter in the current debate about the advantages of investing Social Security funds in the stock market. In Table 4 we report the premium for some interesting sub-periods: 1889–1933, when the United States was on a gold standard; 1933–2000, when it was off the gold standard; and 1946–2000, the postwar period. Table 5 presents 30 year moving averages, similar to those re￾ported by the US meteorological service to document ‘normal’ temperature. Table 4 Equity Premium in Different Sub-Periods Time Period % real return on a market index % real return on a relatively riskless security % equity pre￾mium Mean Mean Mean 1889–1933 7.01 3.09 3.92 1934–2000 8.76 -0.17 8.93 1946–2000 9.03 0.68 8.36 Source: Mehra and Prescott (1985). Updated by the authors