Musings on Markets

JULY 13, 2022

Country Risk: Equity Risk For equity investors, the price of risk is captured by the equity risk premium, and equity risk premiums will vary across countries. Please do not attach any political significance to my country groupings, or take them personally.

Risk Premium 83

Risk Premium Risk-free Rate Start-ups Equity 83

Valutico

OCTOBER 20, 2022

Rf = Risk-free Rate. B = Beta. (Rm Rm – Rf) = Equity Market Risk Premium. Cp = Cost of Equity Premium. DCF WACC—similar to the above except that it calculates a different WACC in each forecast period based on a changing capital structure (D/E) and thus a changing beta in each period.

Discounted Cash Flow 52

Discounted Cash Flow Terminal Value Weighted Average Cost of Capital Net Present Value 52

Musings on Markets

FEBRUARY 10, 2021

I know that many of you are not fans of modern portfolio theory or betas, but ultimately, there is no way around the requirement that you need to measure how risky a business, relative to other businesses. (More on that issue in a future data update post.) But what if the company is looking at a project in Nigeria or Bangladesh?

Risk-free Rate 52

Risk-free Rate Risk Premium Start-ups Equity 52

Musings on Markets

JANUARY 12, 2021

Thus, you and I can disagree about whether beta is a good measure of risk, but not on the principle that no matter what definition of risk you ultimately choose, riskier investments need higher hurdles than safer investments.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

Musings on Markets

JANUARY 5, 2024

Employee Count & Compensation I nvesting Principle Financing Principle Dividend Principle Hurdle Rate Project Returns Financing Mix Financing Type Cash Return Dividends/Buyback s 1. Beta & Risk 1. Equity Risk Premiums 2. Ratings & Spreads 2. Return on Equity 1. Debt Ratios & Fundamentals 1.

Dividends 100

Dividends Risk Premium Equity Book Value 100

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Equity 78

Equity Book Value Start-ups Corporate Finance 78

Musings on Markets

JANUARY 28, 2024

In short, if you don't like betas and have disdain for modern portfolio theory, your choice should not be to abandon risk measurement all together, but to come up with an alternative risk measure that is more in sync with your view of the world.

Risk Premium 95

Risk Premium Beta Start-ups Equity 95