what does a high equity risk premium mean 
the higher the equity risk premium the more you will earn from investing in stocks than you would by investing in risk free assets this makes investing in stocks more enticing however since the equity risk premium is based on historical data the returns are not guaranteed the bottom lineinvestors take risks to earn the highest possible return within their risk tolerances calculating the equity risk premium can indicate to investors how much more return they ll achieve than if they opted for a risk free rate however this is not a true mechanism to gauge potential returns as the calculation relies on historical data which is never indicative of future performance 