Equity risk premium influences hurdle rates in finance, Aswath Damodaran notes

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Andrey Mastykin

16.03.2026

Equity risk premium influences hurdle rates in finance, Aswath Damodaran notes — Equity risk premium in finance matters

The equity risk premium (ERP) is highlighted as an essential component in corporate finance, valuation, and financial planning.

Aswath Damodaran says that ERP affects hurdle rates and discount rates, making it a central consideration in expected returns calculations. He states that in 2009, he consolidated his knowledge into a paper that he has updated each year since.

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Damodaran’s annual ERP updates thus remain a crucial reference point for market observers amid fluctuating rates and shifting investor sentiment. The significance of these dynamics was evident when U.S. treasury rates fell below 4 percent and market volatility intensified, a development examined in the context of an S&P 500 flatlining in February 2026, as detailed in S&P 500 flat in February 2026 as U.S. treasury rates drop below 4 percent and market volatility intensifies, Aswath Damodaran observes.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.

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