6 paper as a proxy for a riskless short-term security prior to 1920 and Treasury certificates from 1920-1930.Our data prior to 1920,was taken from Homer(1963).Most researchers have either used our data set or Siegel's. Sub-period 1926-present Equity Return Data This period is the"Golden Age"in regards to accurate financial data.The NYSE data- base at the Center for Research in Security Prices(CRSP)was initiated in 1926 and provides re- searchers with high quality equity return data.The Ibbotson Associates Yearbooks are also a very useful compendium of post-1926 financial data. Return on a Risk-free Security Since the advent of Treasury bills in 1931,short maturity bills have been an excellent proxy for a"real"risk-free security since the innovation in inflation is orthogonal to the path of real GNP growth.Of course,with the advent of Treasury Inflation Protected Securities(TIPS) on January 29,1997,the return on these securities is the real risk-free rate. 1.3 Estimates of the Equity Premium Historical data provides us with a wealth of evidence documenting that for over a cen- tury,stock returns have been considerably higher than those for Treasury-bills.This is illustrated in Table 1,which reports the unconditional estimates for the US equity premium based on the 8 Ibbotson Associates."Stocks,Bonds,Bills and Inflation."2000 Yearbook.Chicago.Ibbotson Associates.2001. See Litterman(1980)who also found that that in post war data the innovation in inflation had a standard deviation of one half of nconditional estimates we use the cntire data set to fomm our estimate.The Mchra-Prescott data sct covers the ong est time period for which both consumption and stock return data is available.The former is necessary to test the implication of consumption based asset pricing models.6 paper as a proxy for a riskless short-term security prior to 1920 and Treasury certificates from 1920–1930. Our data prior to 1920, was taken from Homer (1963). Most researchers have either used our data set or Siegel’s. Sub-period 1926–present Equity Return Data This period is the “Golden Age” in regards to accurate financial data. The NYSE data￾base at the Center for Research in Security Prices (CRSP) was initiated in 1926 and provides re￾searchers with high quality equity return data. The Ibbotson Associates Yearbooks8 are also a very useful compendium of post–1926 financial data. Return on a Risk-free Security Since the advent of Treasury bills in 1931, short maturity bills have been an excellent proxy for a “real” risk-free security since the innovation in inflation is orthogonal to the path of real GNP growth.9 Of course, with the advent of Treasury Inflation Protected Securities (TIPS) on January 29, 1997, the return on these securities is the real risk-free rate. 1.3 Estimates of the Equity Premium Historical data provides us with a wealth of evidence documenting that for over a cen￾tury, stock returns have been considerably higher than those for Treasury-bills. This is illustrated in Table 1, which reports the unconditional estimates10 for the US equity premium based on the 8 Ibbotson Associates. “Stocks, Bonds, Bills and Inflation.” 2000 Yearbook. Chicago. Ibbotson Associates. 2001. 9 See Litterman (1980) who also found that that in post war data the innovation in inflation had a standard deviation of one half of one percent. 10 To obtain unconditional estimates we use the entire data set to form our estimate. The Mehra-Prescott data set covers the long￾est time period for which both consumption and stock return data is available. The former is necessary to test the implication of consumption based asset pricing models