Average market risk premium in Germany 2011-2023

Market risk premiums (MRP) measure the expected return on investment an investor looks to make. For potential investors looking to add to their portfolio, the perfect scenario for a risk-based investment would be a high rate of return with as small a risk as possible. There are three main concepts to MRP’s, including required market risk premiums, historical market risk premiums and expected market risk premiums. In 2023, average market risk premiums in Germany stood at 5.7 percent.

MRP in Europe

As of 2023, Germany had one of the lowest average market risk premium in Europe. At the same time, market risk premiums in Ukraine were almost twice as high due to the risk of investment involved.

Risk free rates

Risk free rates are closely associated to market risk premiums and measure the rate of return on an investment with no risk. As there is no risk associated, the rate of return is lower than that of an MRP. Average risk free rates across Europe were relatively low in 2022. The risk free rate of investment in Germany was less than one percent as of 2022.