On 1 October 2026, Aswath Damodaran put the equity risk premium on US shares at 4.20%. That is the extra yearly return, above the 10-year US Treasury yield, built into the S&P 500's price that day.
Damodaran is a finance professor at New York University's Stern School of Business. He publishes that estimate every month, along with free data on risk, costs of capital and valuation ratios by industry. This guide covers who he is, his published methods, what his datasets hold and how to use one of them.
Who is Aswath Damodaran? Aswath Damodaran is Professor of Finance at New York University's Stern School of Business, where he has taught since 1986. He writes books on valuation and corporate finance and publishes free valuation data on his website.
His best-known estimate is the implied equity risk premium for the S&P 500: the extra return over Treasury bonds that share prices imply. It was 4.20% on 1 October 2026.
His datasets cover about 100 industries, for the US and other regions. Most are updated once a year, in the first two weeks of January.
A cost of capital is the yearly return a company must earn to pay its lenders and shareholders. In January 2026, his figure for US industries ranged from 4.36% for general utilities to 10.66% for internet software.
Who is Aswath Damodaran?
Damodaran holds the Kerschner Family Chair in Finance Education at NYU Stern and joined the school in 1986, according to his faculty page. Before that, he lectured in finance at the University of California, Berkeley.
He earned a doctorate in finance from the University of California, Los Angeles, in 1985. Graduating Master of Business Administration (MBA) students at NYU have voted him "Professor of the Year" nine times, according to the same page.
On his website, he calls himself "a teacher first". He posts his classes there free, including corporate finance, valuation and investment philosophies.
Aswath Damodaran's books and valuation methods
His books include Investment Valuation (4th edition) and The Little Book of Valuation (2nd edition). Others are The Dark Side of Valuation (3rd edition, 2018), Narrative and Numbers (2017) and a 2024 book on the corporate life cycle. Three of them set out distinct methods.
Narrative and numbers. In the preface to Narrative and Numbers, he writes that "a valuation that is not backed up by a story is both soulless and untrustworthy". The book shows how to turn a story about a company into the numbers of a valuation. It also shows how to test a story against those numbers.
Companies across their life cycle. The 2024 book follows companies from start-up through high growth and middle age to decline. It gives a chapter to valuing each stage.
Companies that are hard to value. The Dark Side of Valuation covers young, distressed and commodity companies, plus banks.
Damodaran's implied equity risk premium since 1961
The equity risk premium is the extra yearly return shares are expected to pay over safe government bonds. We explain it in What Is the Equity Risk Premium?
Damodaran estimates it from prices. He takes the cash S&P 500 companies paid out over the past year, as dividends and share buybacks. He grows it at forecast profit growth for five years, then at a slower long-run rate. The premium is the yearly return that makes that cash worth the index level, minus the 10-year Treasury yield.
Source: Aswath Damodaran, NYU Stern (histimpl.xls); YX Insights
Chart 1 shows his estimate at the end of each year since 1961. It peaked at 6.45% at the end of 1979. It fell to 2.05% at the end of 1999.
At the end of 2025, it was 4.23%. That is close to its 1961 to 2025 mean of 4.25%.
He also publishes a monthly figure. On 1 October 2026, it was 4.20%, using a 10-year Treasury yield of 5.29%. A month earlier, it was 4.14%.
The 4.20% uses cash paid out over the past 12 months, with an adjusted payout. He publishes four other estimates, each built a different way. On 1 October, they were:
The past 12 months' cash yield: 3.70%.
The mean cash yield of the past ten years: 5.67%.
The net cash yield: 3.61%.
Normalised earnings and payout: 3.30%.
Damodaran's free datasets: what they hold and when they update
His data page, at pages.stern.nyu.edu/~adamodar under Data, sorts the datasets by topic. The files are free Excel spreadsheets. They include:
Risk and discount rates: betas, which measure how much shares move with the market. Also costs of equity and capital by industry. Also country risk premiums, his estimates of the extra premium for investing in other markets, based on Moody's country ratings. Also yearly returns on US stocks, bonds and bills from 1928.
Profits and cash flow: margins, returns on capital, tax rates and reinvestment.
Valuation ratios, or multiples: price to earnings and enterprise value to earnings before interest, taxes, depreciation and amortisation (EBITDA), among others, by industry. Enterprise value is the value of a company's shares plus its debt, minus its cash.
Each dataset comes for the US and for regions: Europe, Japan, emerging markets (with China and India on their own), Australia with New Zealand and Canada, plus the whole world. He sorts companies into about 100 industries.
Most of the data is updated once a year, in the first two weeks of January. The latest full update was released on 9 January 2026. The next is due in January 2027.
Market data in the January update are as of 31 December. Accounting data cover the latest 12 months available, usually to the end of September of the year before.
A few series update more often. The implied premium is monthly. Country risk premiums were updated on 1 April and 1 July 2026.
Worked example: Damodaran's cost of capital by industry, January 2026
A cost of capital is the discount rate in a Discounted Cash Flow (DCF), which values a company as its future cash in today's money. We build a DCF for Microsoft in What Is a DCF?
Damodaran's US cost-of-capital file, part of the 9 January 2026 update, works out a cost of capital for each industry in three steps:
Cost of equity = risk-free rate + beta × equity risk premium. The risk-free rate is the yield on a safe government bond. How to Estimate the Cost of Equity compares this method with others.
Cost of debt = a borrowing rate, cut for tax at 25%.
Cost of capital = the two costs, weighted by the share of equity and debt in the industry's capital.
Source: Aswath Damodaran, NYU Stern (wacc.xls); YX Insights
Chart 2 shows eight of the 94 US industry groups in the file, plus the whole US market. Internet software had the highest cost of capital, at 10.66%, with semiconductors next at 10.55%. General utilities had the lowest, at 4.36%. The whole US market, 5,994 companies, came to 6.96%.
The file takes the 10-year Treasury yield of 4.18% at the start of January 2026. It subtracts 0.23 points for the risk of a US default, for a risk-free rate of 3.95%. He adds the same 0.23 points to his end-2025 premium of 4.23%, as in Chart 1, for 4.46%.
So the risk-free rate plus the premium stays at 8.41%, the same as before the cut. The 4.46% is a January 2026 figure. His headline premium on 1 October 2026 was 4.20%.
Take semiconductors, with 66 companies. Their beta is 1.518. Cost of equity = 3.95% + 1.518 × 4.46% = 10.72%.
Debt is 2.53% of the semiconductor industry's capital, at 3.97% after tax. So the cost of capital is 97.47% × 10.72% + 2.53% × 3.97% = 10.55%.
Our own estimate of Microsoft's cost of capital, its Weighted Average Cost of Capital (WACC), in What Is WACC?, came to 9.7% in September 2026. That used a 10-year Treasury yield of 5.18%. His January file started from a 10-year yield of 4.18%.
How to use Damodaran's data and its limits
Check the date. January figures age through the year. In his monthly file, the 10-year Treasury yield rose from 4.18% on 1 January 2026 to 5.29% on 1 October. The January file uses a 3.95% risk-free rate built from that lower 4.18% yield.
An industry average is not one company. Companies in one industry differ in risk and debt.
The premium depends on the method. On 1 October 2026, his five estimates ranged from 3.30% to 5.67%. What Is a Reverse DCF? uses his 4.20% for Tesla.
Errors in the source data pass through. He writes that if a data service "makes a mistake, I do as well."
Aswath Damodaran is an NYU Stern finance professor who publishes his valuation methods and data free. His monthly equity risk premium and his January industry files give a DCF a dated, sourced starting point.
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Common questions about Aswath Damodaran
What is Aswath Damodaran known for?
Aswath Damodaran's published work centres on valuation and corporate finance. He is Professor of Finance at NYU Stern, where he has taught since 1986. His website carries a monthly implied equity risk premium for the S&P 500, industry datasets updated each January, free classes and details of his books, including Narrative and Numbers.
Where can I find Damodaran's data?
Aswath Damodaran's data is on his NYU Stern website, pages.stern.nyu.edu/~adamodar, under Data. The files are free Excel spreadsheets, with versions for the US, Europe, Japan, emerging markets and the world. They cover betas, costs of capital, margins, valuation ratios and yearly returns on US stocks, bonds and bills from 1928.
What is Damodaran's equity risk premium today?
Aswath Damodaran put the implied equity risk premium for the S&P 500 at 4.20% on 1 October 2026, using a 10-year Treasury yield of 5.29%. It was 4.14% a month earlier. His four other estimates, each built a different way, gave 3.30% to 5.67%. He publishes a new estimate at the start of each month.
When does Damodaran update his data?
Most of Aswath Damodaran's datasets are updated once a year, in the first two weeks of January. The latest full update was released on 9 January 2026. The next is due in January 2027. His implied equity risk premium is updated monthly. His country risk premiums also get updates during the year, the latest on 1 July 2026.
What is Damodaran's cost of capital for the US market?
In Aswath Damodaran's January 2026 file, the cost of capital for the whole US market was 6.96% a year, across 5,994 companies. By industry, it ranged from 4.36% for general utilities to 10.66% for internet software. The file uses a risk-free rate of 3.95%. Its equity risk premium is 4.46%: his end-2025 premium of 4.23%, plus 0.23 points for US default risk.
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