What is the connection between the equity risk premium and bond yields
What is the connection between the equity risk premium and bond yields? Does the equity risk premium include a term structure? Here is a worthwhile commentary from the economics department at the Federal Reserve Bank of New York (When Are Equity Investors Paid to Take Risk?, J. Benson Durham, 14 May 2014) about its analysis of expected equity returns and the cost of equity capital: (VIEW LINK). The innovative approach has implications for market valuation analysis generally but it has special relevance for all those mining company consultants and executives who habitually use inappropriately low discount rates when trying to entice investors into new projects and who then wonder why the market is not valuing their assets in the same way. The chart is taken from the FRBNY commentary.
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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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