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But historically the pattern does not fit the model.

Historical annual growth is ~3%, so if the average dividend rate is 2% then the real rate of return from equities should be 5%...but it is 7%. With a growth rate of 1.6% in the future we would be looking at 5.6% real growth in stock prices, and since bonds are returning a 1.5% real return rate the equity premium would be ~4%.

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