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Hi,
Read an ACCA article – CAPM part 1
There is a statement that says research has concentrated to find the equity risk premium than expected market return (this means, may be the premium is easy to find than market return)
i wonder how true is that ?
I understand this will not be asked in the exam, but just curious to know.
Thank you.
It is true and is because it is the market premium over the risk free rate that is relevant in the CAPM formula. When calculating it over a period then both the market return and the risk free rate both change from day-to-day and so it makes more sense to concentrate on the market premium.
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