
	Where results make sense

Topic: Risk premium

Related Topics

Risk aversion

Interest rate

Yield curve

2008 Olympic Games

Randomized controlled trial

Tooele County, Utah

Halbur, Iowa

Harijan

Inhalation

Jose Padilla

Lenea

Gero von Wilpert

Captain

Gagliardi Trophy

DOOM community

In the News (Mon 23 Nov 09)

Northern Trust

Marvin Harrison

Peter Chernin

Gary Locke

Match Play

Penelope Cruz

Mickey Rourke

AR Rahman

Danny Boyle

Hugh Jackman

	Risk premium - Wikipedia, the free encyclopedia
		A risk premium is the minimum difference between the expected value of an uncertain bet that a person is willing to take and the certain value that he is indifferent to.
		However, a risk averse contestant may be more likely to choose no door and accept the guaranteed $500.
		The risk premium for equities is also called the equity premium.
	en.wikipedia.org /wiki/Risk_premium (401 words)

	Utility Cost Of Equity - Risk Premium
		The risk premium method is based on the premise that the premium that an investor expects to earn for an equity investment is fairly constant over time.
		The simple risk premium calculates an equity premium for each quarter or each year over the utility cost of debt for a 5 to 10 year historical period, using the DCF method for equity cost each period.
		The market risk premium is best obtained from a recent edition of Ibbotson Associates Yearbook, which unfortunately you'll probably have to pay for.
	www.geocities.com /WallStreet/Market/1839/riskprem.html (427 words)

	FPA Journal - The Vanishing Equity Risk Premium (Site not responding. Last check: 2007-10-21)
		A second problem, as mentioned earlier, is that the expected risk premium may have shifted downward during the period.
		For today’s equity risk premium to match the historical spread in stock and bond returns, the expectations of future corporate profit growth must far exceed the historical growth rates in corporate profits.
		To produce a six percent equity risk premium, corporate earnings must be expected to grow at ten percent, twice as fast as the expected growth for the economy.
	www.fpanet.org /journal/articles/1999_Issues/jfp0599-art6.cfm (2479 words)

	Wiley::The Equity Risk Premium: The Long-Run Future of the Stock Market
		The Equity Risk Premium-the difference between the rate of return on common stock and the return on government securities-has been widely recognized as the key to forecasting future returns on the stock market.
		His insights on risk aversion theory, on the types of risk that have been rewarded over time, and on changing investor demographics all supply the sophisticated investor with important pieces of the risk premium puzzle.
		In his invaluable summing up of the equity risk premium and the long-run outlook for common stocks, Cornell weighs the evidence and assays the impact of a lower equity risk premium in the future-and its profound implications for investments, corporate decision making, and retirement planning.
	www.wiley.com /WileyCDA/WileyTitle/productCd-0471327352.html (678 words)

	The term risk premium has come to have different meanings in different contexts
		Since the credit risk is borne mostly by the shareholders, the return on their risk capital amounts to a risk (insurance) premium paid by the commercial lending line of business.
		The UTR risk premium therefore represents the economic incentive to the lender to bear the risk associated with holding the instrument.
		This follows from a combination of (i) the fact that the UDL risk premium on the loan is the same as the UTR risk premium on the default put and (ii) the applicability of risk premium additivity.
	www.mathfinance.wagner.com /PAPERS/P5/Risk1_Final.html (3349 words)

	Risk premium - Wikipedia, the free encyclopedia (Site not responding. Last check: 2007-10-21)
		If you are risk neutral, then you are indifferent (don't care) between these two choices.
		However, most people are risk averse and would prefer the $500 for sure.
		If this were the minimum amount that they would accept (ie they would refuse the bet with $1999 behind the good door), then the risk premium is $500 ($1000-$500).
	www.encyclopedia-online.info /Risk_premium (244 words)

	Inferring the Forward Looking Equity Risk Premium from Derivative Prices
		This paper considers the measurement of the equity risk premium in financial markets from a new perspective that picks up on a suggestion from Merton (1980) to use implied volatility of options on a market portfolio as a direct ‘ex-ante’ estimate for market variance, and hence the risk premium.
		Here the time variation of the unobserved risk premium is modelled by a system of stochastic differential equations connected by arbitrage arguments between the spot equity market, the index futures and options on index futures.
		Since the risk premium is not directly observable, information about its time varying conditional distribution is extracted using an unobserved component state space formulation of the system and Kalman filtering methodology.
	www.bepress.com /snde/vol8/iss1/art3 (316 words)

	Premium - Wikipedia, the free encyclopedia
		Look up premium in Wiktionary, the free dictionary.
		Premium rate telephone number, the UK Premium Bond
		Risk premium, in finance, the monetary difference between the guaranteed return and the possible return on an investment
	en.wikipedia.org /wiki/Premium (118 words)

	The Big Picture: Equity Risk Premium
		If risk were the only explanation, the difference would suggest that investors were extremely risk-averse, to the point that they would never leave the house for fear of having to cross the street.
		Feb 26, 2006 2:02:45 PM No, the equity risk premium is not like routelette (link is to my blog entry responding to the NYT author).
		This has more to do with the risk aversion inferred from the observed equity premium, but the whole subject of "equity puzzles" is shot through with confusion which probably stems at root from bad statistical technique on the part of (a generation or two of) economists.
	bigpicture.typepad.com /comments/2006/02/equity_risk_pre.html (1793 words)

	NBAA Finance & Tax > War Risk Insurance Update, June 2002
		As respects War Risk Liability, AIG Aviation and Global Aerospace simply multiply the liability premium for each aircraft times 20% to arrive at the War Risk premium.
		For example, if the premium component for the $100,000,000 liability coverage limit your company carriers is $30,000, your War Risk premium would be $30,000 x 20% = $6000.
		As respects War Risk Hull, AIG Aviation and Global Aerospace begin with a base premium rate of.0015 times the insured value of the aircraft to calculate the War Risk Hull premium.
	www.nbaa.org /ops/finance/insurance/warrisk200206.htm (792 words)

	NCRB:: NCRB Assigned Risk Premium Calculator (Site not responding. Last check: 2007-10-21)
		This is a second adjustment in the premium calculation and is applicable to all Assigned Risk policies that qualify for the Experience Modification Factor adjustment.
		The procedure is to compare the minimum premium for the policy to the calculated premium at standard limits, which means that any premium generated by Increased Limits of Employers Liability needs to be subtracted out before the comparison is made.
		Since the minimum premium for class code 8742 is higher than the minimum premium for class code 8810, the minimum premium for class code 8742 ($395) applies.
	www.ncrb.org /premcalc/CalcSupport.asp (1261 words)

	Economics: How Risky Is the Risk Premium? (Site not responding. Last check: 2007-10-21)
		The two scholars at the American Enterprise Institute, a conservative think tank, say the equity risk premium is unjustified--i.e., stocks are too low--because in the long run, stocks aren't more volatile than bonds.
		An easier way to resolve the puzzle is to say that it's a case of mistaken identity--that the premium isn't as big as it appears from looking at the historical data.
		Their calculation is based on going back to the past and analyzing what kinds of returns investors had a reasonable right to expect for the future, given companies' dividend yields and expected dividend growth rates.
	www.businessweek.com /2000/00_52/b3713061.htm (984 words)

	Equity Risk Premium
		The size of the premium will vary as the risk in a particular stock, or in the stock market as a whole, changes; high-risk investments are compensated with a higher premium.
		The reason behind this premium stems from the risk-return tradeoff, in which a higher rate of return is required to entice investors to take on riskier investments.
		The risk-free rate in the market is often quoted as the rate on longer-term government bonds, which are considered risk free because of the low chance that the government will default on its loans.
	www.investopedia.com /terms/e/equityriskpremium.asp (295 words)

	Shearwater Captial - Learning Center - The Equity Risk Premium
		The increase in expected return over the risk-free rate (i.e., the Treasury bond rate) is referred to as the risk premium.
		During the latter 1990s, pundits theorized that the risk premium for stocks was getting smaller because there just wasn't that much risk anymore in the stock market.
		If you are willing to assume the added risk of investing in stocks, you are entitled to a higher rate of return.
	www.shearwatercapital.com /learning/riskpremium.html (415 words)

	The Societal Risk Premium
		The tradeoff between the variability of bill payouts and the interest-rate risk of consols (and their modern reincarnation as long-term bonds) reverses during the 20th century.
		In recent years, in the developed nations, short-term rates have almost always been lower than long-term rates, since investors need to be rewarded for the higher interest-rate risk of bonds, due to the risk of serious damage from inflation.
		Most recently, this relationship of return vs. perceived risk was validated by Campbell Harvey and his colleagues at Duke, who found that stock market returns correlate quite nicely with the degree of perceived economic risk.
	www.efficientfrontier.com /ef/901/society.htm (2069 words)

	EconLog, The Risk Premium, Arnold Kling: Library of Economics and Liberty
		They expect growth in real dividends to be modest (two to four percent), and they say that a normal risk premium is only about 2-1/2 percent (other estimates have been as high as 5 percent).
		I am one of the few economists who does not like the concept of the risk premium, which is measured in the same dimension as yield.
		Economists and others who try to calculate market risk premiums (or the margin of safety) often use these calculations to draw conclusions about whether or not the stock market is overvalued.
	econlog.econlib.org /archives/2003/02/the_risk_premiu.html (572 words)

	Minimum Risk Premium: The Knaepen Package (Site not responding. Last check: 2007-10-21)
		In 1998, new disciplines on minimum risk premium were integrated into the Arrangement.
		Reflect risk, thereby ensuring that risk premium rates are not inadequate to cover long-term operating costs and losses.
		Accordingly, the OECD Secretariat is not in a position to indicate the premium rate charged for any specific transaction; any transaction-specific enquiries should be directed to Participants' export credit agencies.
	www.oecd.org /document/10/0,2340,en_2649_201185_2668426_1_1_1_1,00.html (326 words)

	EDHEC-Risk - Is Value Riskier than Growth?
		The explanation for this difference has been the subject of numerous studies, using different methods of investigation, to find out whether there is a risk premium for value stocks.
		The betas of small stocks covary positively with the expected risk premium, while the betas of large stocks covary weakly or negatively with the expected risk premium.
		They also observe that the asymmetric risk dispersion between value and growth persists when betas are measured with respect to unexpected industrial production growth.
	www.edhec-risk.com /research_news/choice/RISKReview1064814802387731896?printable=1 (601 words)

	Theory of Risk Aversion
		We first turn to the concept of univariate "risk aversion" which, intuitively, implies that when facing choices with comparable returns, agents tend chose the less-risky alternative, a construction we owe largely to Milton Friedman and Leonard J. Savage (1948).
		However, the risk premiums, expressed in terms of "wealth", might be a better magnitude.
		In Figure 7, the risky asset y is represented by the chord connecting points A and B on the utility curve, and E[u(y)] is expected utility of asset y.
	cepa.newschool.edu /het/essays/uncert/aversion.htm (6248 words)

	Wilmott Forums - Equity Risk Premium, dividend puzzle and duration (Site not responding. Last check: 2007-10-21)
		There is a lot of controversy surrounding the equity risk premium, dividend puzzle, stock duration, relative valuation, etc. I have written some of my thoughts in the following paper and would appreciate some insight and comments.
		To say that the risk premium on the growth stock is (or should be) higher is the same as saying that the company's yield curve (zero coupon curve, actually) is positively sloped.
		My remark is only that agency risk is a big (varying, but big) component of stocks risk, and therefore, it should also be reflected in the risk premium.
	www.wilmott.com /messageview.cfm?catid=4&threadid=1953 (3182 words)

	Inflation Risk Premium (Site not responding. Last check: 2007-10-21)
		Lenders want a return on their money which compensates them for the inflation they expect and the risk that their inflation expectation could be wrong.
		Not only do lenders want to be compensated for the inflation they expect, they also want to be compensated for the risk that inflation could increase during the term of their loan.
		The extra "risk premium" is for inflation changes.
	www.finpipe.com /inflater.htm (375 words)

	Of Risk and Myopia
		Thus, the expected equity risk premium is about 3.5%.
		Richard Thaler and Shlomo Benzarti, in their classic article "Myopic Loss Aversion and the Equity Premium Puzzle" (Quarterly Journal of Economics, 1995), recalled a story told by Paul Samuelson, who offered a colleague a coin toss with a gain of $200 for heads and a loss of $100 for tails.
		To repeat: the risk tolerance of an investor is determined largely by how often he checks his portfolio.
	www.efficientfrontier.com /ef/102/taleb.htm (1188 words)

	InsWeb Insurance Glossary Life Insurance Terms (Site not responding. Last check: 2007-10-21)
		It provides that the cash value of the policy be used as a single premium to purchase paid-up insurance in whatever amount the cash value will provide, which will be less than the original face amount in most cases.
		A form of annuity contract that is entered into before a selected retirement age with the consideration paid in installments until that age is reached.
		A rider on a Life Insurance policy providing that, in the event of the death of the insured within a specified period of time, the policy will pay, in addition to the face amount, an amount equal to the sum of all premiums paid to date.
	www.insweb.com /learningcenter/glossary/life-r.htm (435 words)

	[No title] (Site not responding. Last check: 2007-10-21)
		As risks are reduced, like in strong economic times and easy monetary policy times (there are good papers on this), the value premium is likely to shrink (investors get a one time capital gain and then lower risk premium going forward).
		Fact is (we know now) that the value risk premium in early 2000 (corresponding with Bernstein's "Who Killed Value") was as high as it had ever been, at least as high as post-great depression years.
		Secondly, I think if Value premiums were going to be arbitraged away, they would have done so in the few years after 1992 and Fama/French's "Characteristics, Covariances..." paper, which probably is a vote in favor of the risk based explaination.
	socialize.morningstar.com /NewSocialize/Asp/FullConv.asp?forumId=F100000015&convSeqNumber=48910&mrr=1143133080 (1683 words)

	CUNA
		The Risk Premium and the Risk-Free Rate - The relationship between risk and return is fundamental to investing.
		After defining types of risk, the articles discuss risk premium and the risk-free rate.
		The material here is meant to help you evaluate the risk levels of investments so that you can choose them according to your own risk tolerance.
	www.creditunion.coop /tutorials/tl249242250.html (278 words)

	References - The Market Equity Risk Premium - Treasury Paper - The Treasury
		Arnott, Robert and Ronald Ryan (2001) "The death of the risk premium." jpm: 61-74.
		Li, Haitao and Yuewu Xu (2002) "Survival bias and the equity premium puzzle." jof 57(5): 1981-1995.
		Mehra, Rajnish and Edward Prescott (1985) "The equity premium: A puzzle." Journal of Monetary Economics 15: 145-161.
	www.treasury.govt.nz /merp/09.asp (1719 words)

	[No title]
		The market risk is called systematic and the diversifiable risk is called unsystematic.
		securities) The reward for bearing systematic risk, or the risk premium (asset rate in excess of the risk free rate) The amount of systematic risk in the market, or the Beta value ¡~6G6&C+óêî9ï 0 éðá`ððyð( ð ððr ð Sð¼A¶¿ÿ ð ãððÃ ¶ ð ðÇ ð “ð63’¿¿Àÿð° ða¨ÝMost investments carry some degree of risk.
		Generally only U.S. securities (specifically T-bills) are considered risk free [Rf] because the Federal government can raise taxes or borrow as necessary to avoid default.
	web.ovc.edu /advance/hamm/fin13.ppt (225 words)

	Amazon.com: The Equity Risk Premium: The Long-Run Future of the Stock Market: Books: Bradford Cornell (Site not responding. Last check: 2007-10-21)
		The thesis of the book is that the equity risk premium for stocks, which is the compensation given to equity investors for holding shares of risky common stocks, was below, perhaps much below, what was historically normal.
		The current period we are now in appears to be one in which the uncertainties regarding the stock market have increased and thus investors are now demanding greater compensation, that is, a higher risk premium, for bearing those uncertainties.
		Cornell, and much of academia, the Equity Risk Premium is represented by the difference between the returns from the S&P over time, and the returns from treasuries.
	www.amazon.com /exec/obidos/tg/detail/-/0471327352?v=glance (1480 words)

Try your search on: Qwika (all wikis)