Market Risk Premium

Market Risk Premium is the difference between the expected return on a market portfolio and the risk-free rate. Market Risk Premium is also called equity premium, market premium and risk premium.

Market Risk Premium

Market Risk Premium is the difference between the expected return on a market portfolio and the risk-free rate. Market Risk Premium is also called equity premium, market premium and risk premium.

 


Interpretation of Market Risk Premium

The Market Risk Premium can be historical differential return of the market over treasury bonds; the expected market risk premium (expected differential return) of the market over treasury bonds; or the required market risk premuim of a portfolio over the risk-free rate required by an investor.



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