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disiz64

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tT
发表于 2013-4-8 20:21 | 只看该作者

Short-Term YTM vs Long Term YTM on equity risk premium

long, actually, increase, someone, equity
Hi guys,
can someone explain to me WHY switching from long -term YTM to short term YTM would actually increase the size of the risk premium?
Thanks

 

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EastCoastJ

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发表于 2013-4-8 20:21 | 只看该作者
cuz you have no long term financing? that means can’t make payments ie. equity can go down more hence risk is up.

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tarunajwani

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3#
发表于 2013-4-8 20:21 | 只看该作者
Risk Premium = Market Return - Risk Free Rate
Shorter term treasuries have lower YTM (almost always). So using these will increase the risk premium.

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nitoha

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发表于 2013-4-8 20:22 | 只看该作者
Ah i was thinking in the context of a build-up Model where you just tag a 3-5% premium onto the YTM of a debt instrument

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siavosh

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5#
发表于 2013-4-8 20:22 | 只看该作者
This is only true when we have normal yield curve. It’s the other way round when they say that the yield curve is inverted.

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