Skip to main content
Skip table of contents

How is equity risk premia calculated?


There are three steps to calculating equity risk premia. 

Step 1: Get the risk premia 𝛾𝑗,𝑡 from market prices:

Step 2: Estimate the price ðœ†ð‘˜,,𝑡 of each risk factor given the factor exposures 𝛽𝑗,𝑘,𝑡 of each transaction. 

Step 3: Apply factor prices (lambdas) to new assets to compute their risk premia given their factor exposures. 


Further Reading

A comprehensive explanation of our Equity Risk Premia approach can be found here.

JavaScript errors detected

Please note, these errors can depend on your browser setup.

If this problem persists, please contact our support.