Abstract

Equity has always remained an instrument of long term wealth creation. India being a developing nation with low average age group and rising per capita income; investment in equity may provide a significant wealth creation opportunity provided equity risk premium (ERP) is significant enough. ERP also helps in identifying the cost of equity and cost of capital of the business and hence, provide valuable insights for project appraisal decisions. This paper answers the question “Is the ERP offered by Indian stock market justifiable?”

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