What Is a Control Premium?

The equity premium (The Equity Premium) refers to the phenomenon that the return on stocks is greater than the return on risk-free assets.

Equity premium

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The equity premium (The Equity Premium) refers to the phenomenon that the return on stocks is greater than the return on risk-free assets.
Chinese name
Equity premium
Foreign name
The Equity Premium
Real
Stock returns are greater than risk-free asset returns
Within a certain range
Is normal
Due to the high risk of stocks, a large number of risk-averse investors in the market will inevitably require high returns to compensate for the high risks brought by holding stocks, so a certain degree of equity premium is a normal market phenomenon.
Reasons for equity premium
1 is the market's average stock return is the expected "threshold" for investors to participate in investment activities in the market. If the current yield is lower than the average return, rational investors will abandon it and choose a higher yield investment;
2 is that the average market rate of return is an ex-ante expected rate of return, which means that there may be a difference between ex-ante expectations and ex-post values.
Types of "premium" equity:
1. Capital premium in capital reserve
It means that the amount of investment paid by the investor to the enterprise is greater than its share in the registered capital of the enterprise.
2. Equity premium
It refers to the amount that the actual amount received when a company limited by shares issued a premium exceeds the total par value of the shares.
3. Equity transfer
Equity transfer is a civil legal act in which a company's shareholders transfer their shareholder's rights to others for compensation in accordance with the law, so that others can obtain equity. We will talk about contact later. [1]

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