Equity risk premium
In simplified form, the difference between the expected share price and the risk-free interest rate, in effect the interest rate on first-class government bonds, i.e. securities issued by countries that are able and willing to repay the loans they have taken out. The higher CETERIS PARIBUS the equity risk premium, the more favorable are the expectations of increases in equity prices. – See equity price risk. – Cf. ECB Monthly Bulletin of November 2008, p. 96 f. (calculation; explanations), Deutsche Bundesbank Monthly Bulletin of July 2009, p. 25 (risk premium for Dax stocks since 1991), Deutsche Bundesbank Annual Report 2009, p. 29 (equity risk premia compared with price indices), Deutsche Bundesbank Monthly Bulletin of August 2010, p. 47 (difference between European equities and an investment, calculated using a dividend present value model).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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