equity risk premium

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Equity Risk Premium

The return that an investor expects over and above the risk-free rate of return in exchange for investing in common stock instead of U.S. Treasury bonds. The equity risk premium may be calculated as the return such a stock actually earns over a given period. For example, if the interest rate on a Treasury bond is 4% and the stock returns 9%, the equity risk premium is 5%. Whether or not this is worth the investment depends on the cost of the stock, the risk relative to other stocks with similar returns, and the investor's own risk aversion. The equity risk premium is also called simply the equity premium.

equity risk premium

The extra return expected from investments in common stocks compared to the return from U.S. Treasury securities.
References in periodicals archive ?
3) For continuous discounting over an infinite horizon, k (E/P) = r + b--g, where k equals the current, and assumed future, dividend payout ratio, E current earnings, P the current stock price, r the riskless interest rate, b the equity premium, and g the growth rate of earnings.
In this Economic Commentary, we attempt to reconcile investors' expectations with a decline in the equity premium, using a standard approach to stock-price valuation.
The common stock equity premium is the additional return that is required by investors to induce them into investing in companies traded on one of the three major exchanges.
We examine the time-series relation between aggregate bid-ask spreads and conditional equity premium.
However, we also found that relaxation of this assumption had only a minor impact on the equity premium delivered by the model.
In the last part of the paper we present estimations concerning the Polish financial market and we try to combine the results with the proposed solutions to the equity premium puzzle.
M2 EQUITYBITES-January 28, 2016-IRON Funds launches Equity Premium Income Fund
BANKING AND CREDIT NEWS-January 28, 2016-IRON Funds launches Equity Premium Income Fund
Households that do not participate in the equity market forgo the large equity premium.
Policy Billing Services and Equity Premium Finance founder, Stuart Bruce, and his experienced management team have served the Canadian market with first class service.
The academics, citing Ibbotson data, suggest that the long-term equity premium is 7.