Question

Country: USA

Right now, is the market risk premium sufficient for you to invest in the stock market? How much do you think the stock market will return over and above the Treasury10-year bond rate? As an investor, is that an important question to answer before you invest in the stock market? Do you think it will return enough to justify the added risk? Do you think this premium will vary for different countries or for the same country over different time spans?

Answer 1

No, I do not think that current market premium is sufficient for me to invest into the stock market because there is too much of risk for very low rate of return so there is a very inattractive risk to reward ratio for investment

I think stock market will be underperforming the treasury Bond rate in coming Years by a large margin of 2% and this difference will be accredited to the huge runoff of stocks without fundamental change in the the underlying economy and Efficient market will be adjusting to the the current economic situation so I think that there will be a lower rate of return

Yes, it is an important question to understand because it will provide us with the understanding of required rate of return for a given amount of risk and it will provide us for a time period for investment.

It will not return enough because it will be leading to very low rate of return for high rate of risk present market stocks are already running at very high valuations

Yes, this premium is going to vary because there is change in the underlying condition as well as there will be high risk free rate of return in offered in many countries and there will be different inflation rate and other macroeconomic conditions like developing economies will be offering with higher rate of interest as risk-free interest from the government securities.