Equity risk premium
Also called: ERP, market risk premium
The extra return investors require for holding shares in general rather than risk-free government bonds.
It cannot be observed directly. Analysts estimate it from long histories of returns, surveys or the returns implied by current prices, and the methods give different answers, which is one reason discount rates differ between analysts.
Learn more in these lessons
- Discount rates and the cost of equityHow do you choose a discount rate for valuing a company's shares?
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