EQUITY PREMIUM
This refers to the additional return that an investor can earn by investing in stocks over more conservative financial assets like bonds. The existence of such a premium in the return on stocks is generally considered as compensation for the additional risk assumed while investing in them. The higher the degree of risk in an asset, the fewer the number of people willing to invest in it. Consequently, relatively less capital chases the future cash flow from risky assets, which leads to higher returns.
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