The yield gap or yield ratio is the ratio of the dividend yield of an equity and the yield of a long-term government bond. Typically equities have a higher yield (as a percentage of the market price of the equity) thus reflecting the higher risk of holding an equity.[1][2]
The purpose of calculating the yield gap is to assess whether the equity is over or under priced as compared to bonds. For a given equity, the following cases may be considered:
If the yield gap is numerically small, then equity yield is lower than bond yield implying that the equity is overpriced.
If the yield gap is numerically large, then equity yield is higher than bond yield implying that the equity is cheap.
yield, yield, yield, ratio, ratio, dividend, yield, equity, yield, long, term, government, bond, typically, equities, have, higher, yield, percentage, market, price, equity, thus, reflecting, higher, risk, holding, equity, yield, yield, ratio, equity, yield, r. The yield gap or yield ratio is the ratio of the dividend yield of an equity and the yield of a long term government bond Typically equities have a higher yield as a percentage of the market price of the equity thus reflecting the higher risk of holding an equity 1 2 Yield Gap Yield Ratio of Equity Yield Ratio of Bond displaystyle mbox Yield Gap frac mbox Yield Ratio of Equity mbox Yield Ratio of Bond The purpose of calculating the yield gap is to assess whether the equity is over or under priced as compared to bonds For a given equity the following cases may be considered If the yield gap is numerically small then equity yield is lower than bond yield implying that the equity is overpriced If the yield gap is numerically large then equity yield is higher than bond yield implying that the equity is cheap See also EditYield finance References Edit Yield Gap Reuter s Financial Glossary Yield Gap Moneyterms This finance related article is a stub You can help Wikipedia by expanding it vte Retrieved from https en wikipedia org w index php title Yield gap amp oldid 1032173636, wikipedia, wiki, book, books, library,
