Bonds are the natural comparison because bonds represent relatively riskless cashflows. Bonds tell you how much you get paid in the future, stocks don't. Other

Bonds are the natural comparison because bonds represent relatively riskless cashflows. Bonds tell you how much you get paid in the future, stocks don't. Otherwise, how can you measure the return to risk? > then it will discount its price by x% ten years later as well That doesn't follow because you're missing a free parameter. Let's say a piece of stock ought to be worth $110 in 1 year if people weren't risk averse (based on how we think the company will do, etc.), but it'll only be worth $100 because of the risk. It can still be worth $91 today, implying a 10% return, for example. For any path of future expected equity values, regardless of what future discount you apply, there is a price today that will imply an equity risk premium. FYI, people have empirically measured the implied equity risk premium over long periods of time. The general consensus is that equity returns around 5-10% more per annum that a risk-free asset, but it varies greatly from decade to decade: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr714.pdf https://www.newyorkfed.org/medialibrary/media/research/staff... https://en.wikipedia.org/wiki/Equity_premium_puzzle https://en.wikipedia.org/wiki/Equity_premium_puzzle