Yield gap
The yield gap or yield ratio is the ratio of the dividend yield of an equity and the yield of a long-term government bond. Typically equities have a higher yield (as a percentage of the market price of the equity) thus reflecting the higher risk of holding an equity. formula_1 The purpose of calculating the yield gap is to assess whether the equity is over or under priced as compared to bonds. For a given equity, the following cases may be considered: See also. Yield (finance)