Market Risk Premium

[Imperator]

Going back to basics, I have been trying to analyze certain stocks using the CAPM model. This would:

required rate of return on the stock = risk free rate + (market risk premium)xBeta of stock

The beta is easilly accessible, and the risk free rate is usually short term treasury yeilds, but where can I find access to data on the market risk premium?

This is important, since having this complete equation gives imputs to other models that actually price equities.

[aiki14]

Originally Posted by Imperator

Going back to basics, I have been trying to analyze certain stocks using the CAPM model. This would:

required rate of return on the stock = risk free rate + (market risk premium)xBeta of stock

The beta is easilly accessible, and the risk free rate is usually short term treasury yeilds, but where can I find access to data on the market risk premium?

This is important, since having this complete equation gives imputs to other models that actually price equities.

Unfortunately you have to assess market risk yourself, or you can read the companies 10-K (it is required to be in there) to get their opinion. Assigning a specific value requires limiting assumptions (probability of market events affecting company, cost of the effects, etc), and each one decreases accuracy. This type of risk modeling is what the analysts get the big money for at Merrill and Lehman and their ilk.
A good start for the individual investor is the morningstar full reports, they are 7-15 page fundamental analyses. If you use a full service broker they will probably have this type of analysis on the large caps and maybe the mids and smalls. They are too big to post examples here. Too bad, because I think the newbies would be well served to see them. I love the research that Merrill provides.