Shrinking risk premium for equities

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The extra returns for holding shares over risk-free assets will fall by nearly one third from present levels, making a reliance on equities by pension funds "a pretty dangerous strategy", London Business School research warns.

LBS academics estimate the equity risk premium will contract from 4.5%, to about 3.1% in future. Each figure represents the extra reward for holding shares rather than Treasury bills, in return for...

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