Equity risk premium Definition | Legal Glossary | LexisNexis
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GLOSSARY

Equity risk premium definition

What does Equity risk premium mean?

Pension fund investors should earn more for investing in equities than investing in bonds, because equities are riskier – the company can go bust.

The amount extra that they earn is called the equity risk premium. Over the years it has proved to be around 4%, and the history is published every year in the BZW Equity/Gilt Study (in the UK) and Ibbotson and Sinquefield (in the US).

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