Market risk Premium of ASX200 March 2014....Now at 12.5%!!!!!!!

Wow is all I can say.

Calculated the Market Risk premium of March 2014 and we are looking at a risk premium of 12.5% Getting pretty crazy out there.

ASX200 market return (Capital) over the last 2.5 years is sitting at 11.61% a year. Average dividends of 4.57%. Meaning the Market has returned a very nice 16.18% a year. Not bad going.

Risk free rate is now sitting at around 3.67% so that leaves us a Market Risk Premium of 12.5%! That is the highest it has been since I started recording them back in 2011.

For mine, that is getting a bit unsustainable. You would have to start thinking a big correction is coming as there is no way companies out there can have their equity cost of capital at those sort of levels. They can't have a ROE of over that consistently in the current conditions.

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