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Equity Risk Premium Ibbotsen-Chen Supply Side formula

January 3, 2016

ERP = [1 + i] * [1 + REg] * [1 + PEg] – 1 + Y – RF

i = expected inflation rate

REg = expected real growth in GDP

PEg = relative value changed due to changes in P/E

Y = Yield on Market Index

RF = Risk-free rate of return

ERP = Equity Risk Premium

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From → Asset Valuation

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