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The equity risk premium

Valuation/ERP · implied, Damodaran · Mar 2026 · 2 sources · data as of 31 Jul 2026

Government bonds pay you a return with, near enough, no risk of not being paid. Shares don't. So you'd want more from shares to make holding them worthwhile. How much more is the equity risk premium, and it's probably the most consequential number in finance that nobody agrees on. Every valuation you've ever read has one sitting inside it, usually unstated.

There are two ways to estimate it and they don't agree. One looks backwards at what equities actually delivered against government bonds. The other takes today's index level, forecasts the cash flows behind it, and solves for the discount rate that makes the two match. This page has the current implied estimate, 4.51% as of 13 March 2026, the risk free rate it's measured against, and the range of historical estimates for what is supposedly the same quantity: 5.5% all the way up to 14.5%. That's nine percentage points of disagreement about a single input, and it sits inside every discounted cash flow model, every cost of capital estimate and every asset allocation framework in use.

I built it because the gap between those two approaches usually gets waved off as a technicality, and it isn't one. They answer different questions, and it's worth knowing which question you're actually asking. The measure also moves quickly, which is the other reason the date on any figure matters. The number here is Damodaran's, it's dated, and he updates it monthly with the spreadsheet attached. For something that moves this fast, go and get the current one.