Equity Risk Premium ! Equity risk premium refers to an excess return that investing in the stock market provides over a risk-free rate. This excess return compensates investors for taking on the relatively higher risk of equity investing. The size of the premium varies and depends on the level of risk in a particular portfolio The formula for calculating the equity risk premium is equal to the difference between the expected market return and risk-free rate • Equity risk premium predicts how much a stock might outperform risk-free investments over the long term. • Calculating the risk premium can be done by taking the estimated expected returns on stocks and subtracting them from the estimated expected return on risk-free bonds. #finance #linkedin #valuation The Valuation School
Very informative Vaibhav Negi
| MBA (Finance) | Valuation | Equity Research | Financial Modelling | Corporate Finance | Analyst | Investment Banking Aspirant |
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