Time for another update on the Market Risk Premium for the ASX.
Using my customary 2.5 years of individual returns for the ASX200, we have a market return (Capital Gain) of 3.27% p.a. Adding the average dividend yield over this time of 4.6%, means we have a market return of 7.87% (down from August 2012 by around 2%). Risk free rate (10 year Commonwealth Bond) average of 4.15% means our market risk premium = 7.87%-4.15% =3.72% (down from 5.13% in August).
Which makes sense I guess as interest rates have fallen, you would expect the cost of capital of equity to go down a little as well.
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