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Average market risk premium in the U.S. 2011-2020

The average market risk premium in the United States remained at 5.6 percent in 2020. This suggests that investors demand a slightly higher return for investments in that country, in exchange for the risk they are exposed to. This premium has hovered between 5.3 and 5.7 percent since 2011.

What causes country-specific risk?

Risk to investments come from two main sources. First, inflation causes an asset’s price to decrease in real terms. A 100 U.S. dollar investment with three percent inflation is only worth 97 U.S. dollars after one year. Investors are also interested in risks of project failure or non-performing loans.

The unique U.S. context

Analysts have historically considered the United States Treasury to be risk-free. This view has been shifting, but many advisors continue to use treasury yield rates as a risk-free rate. Given the fact that U.S. government securities are available at a variety of terms, this gives investment managers a range of tools for predicting future market developments.

Average market risk premium in the United States from 2011 to 2020

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Sources

Release date

March 2020

Region

United States

Survey time period

2011 to 2020

Number of respondents

81 countries with 1,946 answers

Special properties

finance and economics professors, analysts and managers

Method of interview

Email survey

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