The results of Professor Pablo Fernandez’s latest survey of the market risk premium (MRP) and risk-free rate (RF) used in 95 countries in 2022 was released earlier this month. Many UK business valuers refer to this longstanding survey in their cost of capital analyses.

Currently, based on UK-only responses, Fernandez found a market risk premium of 6.1% (a median of 6.0%). As is typical, these rates are marginally higher than the averages for the US (at 5.6% and 5.5%, respectively). Also, not surprisingly, countries such as the Ukraine, Argentina, and Venezuela lead all nations, with rates between 28% and 35%.

The UK rate increased compared to 2020 (5.8%) and 2021 (5.6%).

Including risk-free rates, the UK’s average is 8.4%.

Fernandez notes that “many respondents use … an RF higher than the yield of the 10-year Government bonds. The coefficient of variation (standard deviation/average) of RF is higher than the coefficient of variation of MRP for the Euro countries.”

The paper also contains the links to all previous surveys, 2008 to 2021.

Fernandez is a professor of finance at the IESE Business School.