Equity risk premium
The addition to the risk-free rate for holding equities at all: what the market on average pays for the risk taken above government bonds.
How to read the number
The key input of any discounting valuation: it moves the rate, and the rate moves value more than the profit forecast does.
When the metric lies
Historical and market-implied premiums give different figures, and the choice between them changes the valuation. Neither is directly observable.
Also known as: erp