Answer
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 𝜆𝑘,,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.