While there is still a risk premium paid for emerging market bonds, that risk premium is shrinking as these economies grow and become better managed.

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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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If the cash-market yield is also rising, it demonstrates that the market is placing a higher premium for that particular risk.

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Given the historic relationship between the risk premium and economic growth, the market is currently forecasting a growth rate over the next few years of about 1%.

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The risk premium is thus, he suggests, also the market's best guess of the risk and opportunities attached to consensus profit forecasts.

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Because that risk is not passed on to pension beneficiaries (their benefits are guaranteed, whatever the market does) it is improper to use a liability discount rate that includes the risk premium.

FORBES

The semiconductor and equipment industry normally trades at a premium to the market, when measured in terms of the relative valuation of risk-adjusted EVA performance.

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