Calculating Equity Risk Premium by Annukka Jokipii, Martti Luoma, & Petri Sahlström
Any stock market–related decisions we make are based on events that are likely to take place over the next five, seven, or 10 years. But since we don’t know what will take place at a later time with certainty, how do we figure out if our in-vestments are worth the risk? Here’s one way to answer that question. All you need is some data and a spreadsheet.
Fundamental analysts often use equity valuation models to come up with a reason to invest in a stock. Several models exist and one of the key input variables in these models is the equity risk premium (ERP) ...