The historical equity risk premium or excess market return for stocks over risk-free investments is _____.

The historical equity risk premium, which represents the extra return that investors expect from holding stocks over risk-free securities like Treasury bonds, is closely associated with long-term stock market performance. This premium is important for investment decisions, as it compensates investors for the additional risks they undertake by investing in equities.

The average historical equity risk premium has often been estimated around 4.4%. This figure reflects the long-term data suggesting that, despite the volatility and risks inherent in the stock market, investors have consistently gained higher returns compared to safer investments. This 4.4% estimate is derived from historical data spanning several decades, considering various economic cycles and market conditions.

Investors typically use this premium to assess potential returns and to make informed decisions about asset allocation in their portfolios. Understanding the equity risk premium is crucial for evaluating investment opportunities and for strategic financial planning.