Wednesday, September 30, 2009

7th lessson

7th lesson: Higher gains are needed to compensate losses (see table below). Well, this is a lesson that I have to re-remember. And since I am likely to inject capital into my portfolio during times of distress, I may need smaller percentage gains to recover from my losses (in dollars terms).

Equity Risk Premium in US market

Equity Risk Premium (ERP) refers to the additional return over risk-free interest rate for holding equity.  ERP can be computed by taking ea...