A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Yield Gap
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| - | Also known as [[Yield|yield]] ratio. The yield gap compares the [[Dividend Yield|dividend yield]] on equities with the yield on long-term government [[Bond|bond]]s. It is used to assess whether equities are under or over-priced compared with government bonds. The [[Dividend|dividend]] yield on equities (expressed as a percentage of the [[Share|share]] price) is usually higher than the yield on bonds, reflecting the higher [[Risk|risk]] of holding equities. When [[Equity|equity]] prices rise, their dividend yields fall as a percentage of their price, thus reducing the yield ratio. When equity prices fall their yield rises. If equities yields are higher than [[Bond|bond]] yields then equities are often considered to be cheap. | + | Also known as [[Yield|yield]] ratio. The yield gap compares the [[Dividend Yield|dividend yield]] on equities with the yield on long-term government [[Bond|bond]]s. It is used to assess whether equities are under or over-priced compared with government bonds. The [[Dividend|dividend]] yield on equities (expressed as a percentage of the [[Share|share]] price) is usually higher than the yield on bonds, reflecting the higher [[Risk|risk]] of holding equities. When [[Equity|equity]] prices rise their dividend yields fall as a percentage of their price, thus reducing the yield ratio. When equity prices fall their yield rises. If equities yields are higher than [[Bond|bond]] yields then equities are often considered to be cheap. |
Revision as of 08:55, 13 November 2009
Also known as yield ratio. The yield gap compares the dividend yield on equities with the yield on long-term government bonds. It is used to assess whether equities are under or over-priced compared with government bonds. The dividend yield on equities (expressed as a percentage of the share price) is usually higher than the yield on bonds, reflecting the higher risk of holding equities. When equity prices rise their dividend yields fall as a percentage of their price, thus reducing the yield ratio. When equity prices fall their yield rises. If equities yields are higher than bond yields then equities are often considered to be cheap.