Capital Markets Expectations: Financial Equilibrium Approach??

[tyler4040]

I’m having difficulty interpreting the formula for calculating equity risk premiums.
ERPi= correlation of i and global market*standard deviation of i* sharpe ratio of global market
I don’t quite understand the derivation of the formula. Can anybody share their input?

 

[S2000magician]

It’s a roundabout way of saying:
beta × MRP
Think about it.

 

[tyler4040]

S2000magician wrote:
It’s a roundabout way of saying:
beta × MRP
Think about it.

I see….. thanks!!

 

[S2000magician]

My pleasure.