The implied equity risk premium which I computed to be 6.01% on April 1, 2020, has declined to 6.27% if I compute the risk premium using the (now stale) earnings and cash flows, and 5.60%, if I assume a 30% drop in S&P 500 earnings this year and a substantial drop in buybacks.
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One reason may be that the small cap premium studies drew attention and investor money to small cap stocks, and in the process led to a repricing of these stocks. 2 Equity Risk Premiums (ERP): Determinants, Estimation and Implications Equity risk premiums are a central component of every risk and return model in finance and are a key input into estimating costs of equity and capital in both corporate finance and valuation. All very good. You can click on the “Size Premium data links” button to view a list of some data sources.Now, click on the cells in the size premium data table and enter the data. Analysts typically compare realized returns for various asset classes over long historical periods, inferring the premiums from the differences in the return series. Again, these are size premiums relative to the WACC, not the cost of equity. Another is that the small cap premium is a side effect of larger macroeconomic variables (inflation, real growth etc.) We’ve written before about the SWS appraisal case, decided in mid 2017.
The traditional method for measuring return premiums is backward-looking.

Equity Risk Premiums (ERP): Determinants, Estimation and Implications – The 2012 Edition Updated: March 2012 Aswath Damodaran Stern School of Business adamodar@stern.nyu.edu. Based on the latest implied ERPs (as of March 1, 2018) from Professor Damodaran, an estimated ERP of 5% appears reasonable. The Risk Free Rate 27 Discount Rates: I Aswath Damodaran. Subscribe to Size Premium. The implied WACCs and corresponding size premiums are summarized in Exhibit 6. Posted in Equity Risk Premium, Fair Value, Merger Price, Size Premium. Below are some “ammunition” for that. Indeed, Damodaran argues that “even over the long time period that provides the strongest support for existence of a small cap premium, one study finds that removing stocks with less than $5m in market cap causes the small firm effect to vanish. 2 Equity Risk Premiums (ERP): Determinants, Estimation and Implications Equity risk premiums are a central component of every risk and return model in finance and are a key input into estimating costs … 2 Equity Risk Premiums (ERP): Determinants, Estimation and Implications Equity risk premiums are a central component of every risk and return model in finance and are a key input into estimating costs of equity and capital in both corporate finance and valuation. uValue is available at the iTunes store. than public companies, which leads to riskier operations and higher discount rates. Starting in June 2012, I am also reporting equity risk premiums based upon CDS spreads, where those are available.

(Aswath Damodaran, All very good. Stefano Ciliberti , Emmanuel Sérié , Guillaume Simon , Yves Lempérière , Jean-Philippe Bouchaud The Journal of Portfolio Management Jun 2019, jpm.2019.1.086; DOI: 10.3905/jpm.2019.1.086