Risk premium approach

Risk premium approach

A common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.

Risk Premium Approach

In active portfolio management, a way to classify different assets according to their risk. In a risk premium approach, one seeks to find investments with higher returns for higher risks. See also: Risk Premium.
References in periodicals archive ?
Another possibility for the cooperative financial manager to use is the bond-yield-plus risk premium approach.
These factors underlie the weaknesses of an ex post risk premium approach.
Generally, studies supporting an ex ante risk premium approach are based on data from as early as the mid-1960s through the mid-1980s.
The Earnings Incentive Plan option in that case included the provision for an annually authorized rerum on equity range that would span 300 basis points and be based on a risk premium approach that recognizes an inverse relationship between risk premiums and interest rates.