Fees eroding risk premium: Researchers
AUT researchers have used market data back to 1899 to determine that a fair equity risk premium for New Zealand investors to expect over the long term is 4.76%.
That means that investors with money in equities should expect to have a return that is 4.76%per year higher than 10-year government bond yields.
They said using information over such a long period made their work more robust.
“Human expectations over the short term are volatile, it is only by using long-term data that we can truly see the view of investors return requirement of equity. Also, using long-term data allows one to be more confident on the future ERP from a statistical viewpoint.”
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