Angie · learn
Market return
The expected long-run return of the broad market. Subtract the risk-free rate from it and what remains is the equity risk premium.
A fuller explanation of this one is still being written. The definition above is the short answer.
See also
- Equity risk premium — The extra return investors demand for holding stocks instead of Treasuries. Beta scales it up or down for one particular company.
- Risk-free rate — The 10-year Treasury yield, standing in for the return available with essentially no risk. Every other rate in the model is built on top of it.
- Cost of equity — The return shareholders demand for owning this particular company. Known as CAPM, the capital asset pricing model.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
