From the first link:
Market return (rm) – Your input of market rate of return, rm, can be based on past returns or projected future returns. Economist Peter Bernstein famously calculated that over the last 200 years, the stock market has returned an average of 9.6% per year. Whether or not you want to use this as your projection of future stock market returns is up to you as an analyst.
From the second link:
The average return since 1950 was 10.8%.
This is the usual "I just learned about CAPM and so now I have the secret formula for valuing stocks" question.
1) The market risk premium is not calculable from past market returns and is unknown. It's not even very clear how to estimate it although many academic papers have been written on it. Using all kinds of different sensible approaches,you can get market risk premiums that range all over the map.
2) CAPM isn't true and nobody really believes it is true. It's a metaphor to discuss diversification and factor risk models. You should be able to look at any stock and determine what sorts of risks they have and then think about factor risk models for individual stocks. Stocks have interest rate risk (often proportional to their leverage), commodity risk (esp, energy), FX risk etc...
The idea that you can dump 50 prices into Excel, run a regression and then compute a price more accurate than the last price you dumped in Excel is so completely stupid that it has made me ill every time I have seen this question for the last 30 years.
Beware the spammers recommending vpnmaster. Vpnmaster is a total fraud and scam.
I know the equity risk premium formula which is (return on market - risk free rate).
Problem is I know the risk free rate but I don't know where I can find return on the market. Is there a website where it is given?
