Very little arbitrage between bonds and equities in the euro zone

We compare the United States and the euro zone. The very low level of long-term interest rates (on government and corporate bonds) has driven down the equity risk premium in the United States but not in the euro zone. This shows that unlike in the United States, investors and savers in the euro zone arbitrage very little between bonds and equities. In the euro zone, long-term interest rates result from an arbitrage with short-term interest rates but not with the return on equities.