The expected return on the market portfolio is equal to the market risk premium.

Question

Quizplus · Accepted Answer

The expected return on the market portfolio is the weighted average of expected returns of individual assets in the portfolio. Market risk premium, on the other hand, is the excess return required by investors to compensate for the risk of investing in the stock market compared to a risk-free investment. While there is a relationship between the two, they are different concepts and not equal to each other.

The Expected Return on the Market Portfolio Is Equal to the Market