The expected credit risk premium over inflation from investment-grade securities is also expected to remain stable.
FORBES: Portfolio Solutions' 30-Year Market Forecast for Investment Planning (2013 edition)
Instead of declining, the risk premium on the non-defaulting bonds would increase to 707 basis points.
Finally, the risk premium along the entire spectrum of debt instruments has to come in.
Given the history of the risk premium, what will the future reward for equity investors be?
Equities are cheap in Goldman's model, which focuses on the risk premium over government bonds.
Equities had traditionally been seen as paying a risk premium over the return on safe assets.
As sentiment against Wall Street increases, so does the risk premium paid to people who stay invested.
You could do this by engineering a permanent increase in the risk premium.
Until the risk premium contracts substantively, the leveraged buyout sector stays closed down.
There's evidence that the risk premium is peaking for investment grade corporate debt.
And by reducing the currency-risk premium that investors demand for holding kiwi dollars, it would lower real interest rates.
ECONOMIST: Should Australia and New Zealand form a currency union?
"For some reason investors put a much higher risk premium on stocks like Bimantara and Citra Marga, " he says.
This month the Madrid stockmarket has tumbled and the risk premium on Spain's bonds has risen (see article).
Pricing is important, because PBC transfers resource-management risks to suppliers, which must decide what risk premium customers should pay.
The risk premium on Brazilian bonds has soared, leading some analysts to fear that the debt will become unserviceable.
The natural inclination is to price in a risk premium before the weekend.
The emerging markets bond, with its risk premium, is up 3.39% and the US Treasury bond fund is up 0.54%.
FORBES: Oppenheimer's Main Street Case for Emerging Market Bonds
My analysis indicates, rather, that the risk premium on investment grade corporates is generous, making that group attractive by comparison.
In addition, a cap on interest rates offered by banks--less than 10%--virtually eliminates the risk premium associated with energy efficiency investments.
The equity risk premium is usually viewed as the extra return that investors demand for holding equities rather than risk-free bonds.
Even amid falling prices, drug producers continue to profit from the risk premium that prohibition puts on their multi-billion dollar industry.
The risk premium in financial markets comes in as Treasury yields move up and fewer below-investment-grade debentures stop trading like yesterday's sardines.
This is assumed to be the average post-crisis cost of long-term funds to Ireland that incorporates both a term and risk premium.
FORBES: How Much Would Ireland Benefit from Replacing the Promissory Notes with a Long-Term Bond?
The risk premium is thus, he suggests, also the market's best guess of the risk and opportunities attached to consensus profit forecasts.
Investors who bought shares in 1999 did not earn a risk premium.
The first step is to define the equity risk premium more exactly.
It may seem paradoxical that the spread, or risk premium, on bonds of heavily indebted companies almost always declined as interest rates rose.
Trouble in Saudi Arabia, Bahrain or Russia would immediately boost the geopolitical risk premium that is baked in to the price of oil.
FORBES: Leave It To The New York Times To Gin Up A Downside To The American Oil Boom
Or put it this way: The equity risk premium says that stocks have compounded four times as fast as bonds in real (inflation-adjusted) terms.
In that case, the double dip fear could continue hanging over the market, preventing the reduction in risk premium assumed in our non-recession scenario.
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