An article in the Wall Street Journal in 2012 described investors’ behavior since 2000 as a “flight to safety” that has led to “a high equity risk premium.”

a. What does “flight to safety” mean? In this situation, which types of assets are investors likely to be buying, and which are they likely to be selling?

b. Would an increase in the equity risk premium likely lead to higher stock prices or to lower stock prices? Briefly explain.