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Home > QFINANCE Dictionary > Definition of equity risk premium

Definition of

equity risk premium

Stockholding & Investments

extra return expected on equities compared to bonds an extra return on equities over the return on bonds, because of the risk involved in investing in equities

Recommended Further Reading (Term count)
  • Capturing the Equity Premium
    by Erik Gosule
    Erik Gosule is a director, and head of Client Solutions and Investment Strategy at PanAgora Asset Management. As such, he is responsible for assisting in the development and implementation of investment strategies across the firm, including customized solutions that combine multiple investment capabilities designed to meet clients’ specific needs. Prior to joining PanAgora, Mr Gosule worked at the D. E. Shaw Group, where he was most recently a...
  • Measuring Company Exposure to Country Risk
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    If we accept the proposition of country risk, the next question that we have to address relates to the exposure of individual companies to country risk. Should all companies in a country with substantial country risk be equally exposed to country risk? While intuition suggests that they should not, we will begin by looking at standard approaches that assume that they are. We will follow up by scaling country risk exposure to established risk...
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    by Steven Lowe
    With a pension plan, companies agree to provide certain benefits to their employees, by specifying either a defined contribution (where a fixed contribution is made to the plan each year by the employer, with no promises as to the future benefits that will be delivered by the plan) or a defined benefit (where the employer undertakes to pay a certain benefit to the employee at some point in the future). Under the latter, the employer has to put...
  • Measuring Country Risk
    by Aswath Damodaran
    Two key questions must be addressed when investing in emerging markets in Asia, Latin America, and Eastern Europe. The first relates to whether we should impose an additional risk premium when valuing equities in these markets. As we will see, the answer will depend upon whether we view markets to be open or segmented and whether we believe the risk can be diversified away. The second question relates to estimating an equity risk premium for...

Definitions of ’equity risk premium’ and meaning of ’equity risk premium’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’equity risk premium’ and other financial terms with our online QFINANCE Financial Dictionary.

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