Answered By: Barbara Coffey Last Updated: Sep 30, 2019 Views: 45
Answered By: Barbara Coffey
Last Updated: Sep 30, 2019 Views: 45
The CAPM (capital asset pricing model) formula is :
Expected return = Risk free rate + Beta (expected market return – Risk free rate)
So reformatting this equation the Equity Risk Premium = Expected Return - Risk Free rate = Beta(Expected market return-Risk free rate)
- Beta is the measure of company specific risk or volatility
- Using Bloomberg - Ticker<equity>BETA<go> - as beta is a comparison to a market index, confirm that the market index it defaults to is the correct benchmark for the ticker. For instance the NASDAQ Composite is more relevant the the S&P 500 for technology stocks.
- Bloomberg in Firestone (A Floor - RIS Suite)
- Additional company risk ratings
- Type the company's ticker symbol and hit the Equity key
- Type RSKC and hit GO.
- Company equity risk premiums
- Hit Equity
- Type EQRP and hit GO.
- Country equity risk premium
- Hit the yellow Equity Key
- Type CRP and hit the green GO key.
- Stocks, Bonds, Bills, and Inflation by Ibbotson Associates.
- Most recent print version in Firestone Trustee Reading Room Reference, call number HG4507.S86.
- Note this data is also available in the Morningstar Direct database.
- Additional company risk ratings
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