inflation premium

Inflation Premium

The higher return that investors demand in exchange for investing in a long-term security where inflation has a greater potential to reduce the real return. The inflation premium is the reason that most yield curves trend upward. Thus, a bond with a maturity of 30 years almost always has a higher coupon rate than one with a maturity of 30 days. Investors expect to make a larger nominal return in part to compensate them for the lower real return that is almost inevitable because of the nature of inflation. See also: inflation risk.

inflation premium

The portion of an investment's return that compensates for expected increases in the general price level of goods and services. The expectation of rising inflation results in higher long-term interest rates as lenders and borrowers build in an increased inflation premium.
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The significantly positive coefficient for the lagged inflation indicates that the current year's bank lending rate incorporates previous year's inflation as an expected inflation premium for the current year.
To the extent that small firms operate in more competitive environments, they may have less pricing power than larger firms, and hence may be more exposed to inflation risk, and hence command an inflation premium relative to larger firms.
These returns are combination of real return, inflation premium, risk premium, default risk premium and maturity risk premium.
Subsequently, we used the method of extracting the Durham premium (2007) to estimate the inflation premium and extract an implicit measure of inflation (BEIR) that is less distorted.
Nevertheless, the scope for steepening seems limited given the MENA tensions and the associated short-term risk and inflation premium.
In exchange for extending more loans to a federal government that has become a riskier borrower, lenders will ask for an inflation premium.
What has mostly flowed is the supply of dollars, and so some part of oil's increase should be called the Alan Greenspan-Ben Bernanke inflation premium.
Variants of the low inflation premium story appear in:
The average inflation premium is negative, as one would expect given the negative impact of inflation on the mean of asset returns.
Theoretically, Modigliani and Cohn [1979] have shown that expected stock returns should equal the current earnings yield on stocks (defined as earnings over price (E/P)) plus an inflation premium.