Equity Risk Premiums By Continents For 2021 - Infographics

The equity risk premium is the difference between returns on equity/individual stock and the risk-free rate of return. It is the compensation to the investor for taking a higher level of risk and investing in equity rather than risk-free securities.

In other words, suppose an investor is you’re want to allocate his investment between several assets. He invests some of your money in government bonds, which provide a modest but essentially guaranteed return. He invests the other proportion in the stock market, hoping to increase his wealth significantly. The potential for greater returns requires taking a higher risk of losing some or even all of your money. In exchange for taking on that additional risk, you generally expect there’s potential for making higher returns. The difference between his return on his stock investments and the return he gets on his essentially risk-free assets is called the equity risk premium.  

Equity Risk Premiums By Continents - Infographics

We have calculated the equity risk premiums for 2021 in several continents and regions in the world. The following infographics present the results:

Conclusions

The highest risk premium in 2021 is in the Caribbean, with an average equity risk premium of 10.03%. The lowest equity risk premia are North America and Australia & New Zealand, with identical risk premiums of 4.72%.

Our firm valuation platform has efficient algorithms for calculating the risk premium, and to help you perform valuations on your business easily and quickly. Check it out here.