equity premium

Frequency: 6.911.2 per million words

the excess return that investing in the stock market provides over a risk-free rate

premiumADJECTIVE + NOUN

Categories:

equity

Examples (10)

  • The equity premium is a key concept in financial economics for understanding market returns.
  • Investors demand a higher equity premium to compensate for the risks of the stock market.
  • Historically, the equity premium in the US has averaged between 5% and 8% annually.
  • Economists often debate the causes of the so-called equity premium puzzle.
  • A declining equity premium might suggest that stocks are becoming overvalued relative to bonds.
  • The equity premium represents the extra reward for enduring market volatility.
  • Many long-term retirement models rely on a stable equity premium for growth projections.
  • If the equity premium disappears, investors might shift their capital to government bonds.
  • Calculating the expected equity premium is essential for effective portfolio management.
  • Higher volatility in the global market usually leads to a larger required equity premium.