Equity risk premium

Equity risk premium is the extra return investors have historically demanded for holding stocks instead of a safe, risk-free alternative like government bonds. It compensates for the real possibility that stocks can lose value, sometimes sharply, in a way a safe bond does not.

It's typically estimated from long-run historical market returns rather than any single company's own numbers, and it gets scaled by a specific stock's beta when estimating that stock's own cost of equity, a higher beta amplifies the premium actually applied.