Question

An article in the Economist in 2016 noted that since​ 2000, an investor in the United Kingdom would have earned a higher return from buying British government bonds than from buying stock issued by British firms. The article concluded​ that: open double quoteThere has been a negative equity risk premium this century.close double quote ​Source: open double quoteStocks for the Long ​Run?close double quote Economist​, January​ 13, 2016.

Answer 1

Answer: please refer to the explanation section

Explanation:

the question talks about the article only and the is not clear instruction as to what are required to do, however having encountered questions of this nature i would assume the questions wants us to explain what is a risk premium and what does it mean when it is negative.

risk premium is the difference between Returns from risky assets and the returns from risk free assets. The excess of Returns from Risky assets over risk free assets is the risk premium, an extra return that an investor earns by choosing to take risk and in risky assets instead of investing in risk free assets. we can look at risk premium as compensation for taking more risk.

when risk premium is negative it means the returns from returns from Risk free assets are higher than returns from risky assets. there not benefit (excess return) for an investor to take risk and invest in risky assets. Negative risk premium indicates that British companies are not doing well in market, British stocks/shares are not performing well in the market