Page 72 - Russia OUTLOOK 2022

Concerns over geopolitics also affected the equity risk premium, which jumped some 100bp after the news in November. Normally, sovereign risk is not part of ERP and this expansion is most likely temporary. The equity market is dominated by foreign investors, who are much more sensitive to this type of risk. The bond market, owned primarily by local investors, is more robust. Ultimately, local investors are going to buy the elevated ERP and this part of the premium then disappears.w
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