Equity Risk Premium

The extra return that stocks provide over government bonds to compensate for the short to medium-term market risk. It is the concept that justifies investment in stocks, where the capital is at risk, rather than gilt-edged bonds, the safest investment available, where the capital is not at risk provided the bonds are held until maturity. The theory goes that it is only worth investing in stocks if the return exceeds the return on gilts - otherwise, who would take on the extra risk?