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While there is agreement among investors and corporate finance professionals alike that a higher return is expected from investments in equity securities, there is subjectivity around the estimation of such premium. This quantification is further obscured by insufficient data and studies on the topic in emerging economies such as India.
The premium needs to be re-assessed periodically with changes in market performance and expectations of the overall economy. In this edition, we have analysed the Equity Risk Premium (ERP) as of the cut-off date of 31 December 2018. We hope to provide useful insights to investors and professionals in their decision-making process.
