Why you’re mis-estimating the Equity Risk Premium #5

You’ve been swayed by others’ use of high ERP estimates

Your ERP estimate may well be too high if you have been informed by ERP estimates widely used in corporate finance. For some of the previously discussed reasons, many practitioners overestimate the ERP dramatically, ending up with estimates in the range of 7% to 10%.

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Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

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