What would a fair price for Microsoft be if the risk premium were zero?
Further, the evidence shows that in the long run the risk premium is around 5.0% in most countries.
The higher the risk premium, the more worried investors are.
Where is the risk premium associated with an year bond.
Yet another issue can result from the compounding of the risk premium.
This excess expected return is known as the risk premium.
There is a very considerable literature on the risk premium in stock markets.
However, their tests found only 2 out of the 183 possible risk premiums to be significantly different from zero.
They don't think about variation in credit spreads or risk premiums.
However, in all windows considered, the risk premium is always greater than zero.