Risk Premium Specific Risk Systematic Risk 
Andrew Stolz
AUGUST 5, 2020
If an investor moves money from the risk-free asset into the stock market, they should expect to earn a return in excess of the risk-free rate, what is called an equity risk premium. Investments are exposed to two types of risk: systematic and unsystematic. E(r) = Rf + ??(Rm
Valutico
FEBRUARY 13, 2025
It quantifies an asset’s risk relative to the market. Beta’s limitations include its reliance on historical data, potential inability to capture short-term fluctuations and company-specific risks, and sensitivity to benchmark choice.
Equidam
APRIL 22, 2025
10] , [23] , [2] Discount Rate: The rate used to discount future cash flows is typically the cost of equity, calculated via the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium. [23] 23] Risk-Free Rate: Tied to government bond yields (e.g.,
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