Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
“expectedreturn.”Wearguethatriskinaninvestmenthasto beperceivedthroughtheeyesofinvestorsinthefirm.Since publiclytradedfirmshavet ...
thesediverseinvestorswillacceptastherightcostofequity in valuing the company. Estimation Approaches Therearethreedifferentwaysin ...
tooneorafewinvestmentsandriskthataffectsamuchwider crosssectionofinvestments.Wearguethatinamarketwhere themarginalinvestoriswell ...
Weshouldnotethattheexpectedreturnsandvariancesthat we see in practice arealmost always estimatedusing past returns ratherthanexp ...
theeffects,thoughcyclicalfirms(suchasautomobiles,steel, andhousing)mayfeelitmore.Wecategorizetheseasmarket risk. Finally,therear ...
diversified portfolio is a much smaller percentage of that portfoliothanwouldbethecaseifyouwerenotdiversified. Thus,anyactiontha ...
pension fund—for manylarger and even midsize publicly traded companies. 1 Institutional investors tendto be diversified, though ...
ormarketrisk.Inthissection,wediscussthedifferentmodels formeasuringmarketriskandwhytheydiffer.Webeginwith whatstillisthedefaultm ...
firm-specificrisk.Statistically,wecanmeasuretheriskadded byanassettothemarketportfoliobyitscovariancewiththat portfolio. The cov ...
TheCAPMisaremarkablemodelinsofarasitcapturesan asset’sexposuretoallmarketriskinonenumber—theasset’s beta—but it does so at the c ...
unidentifiedstatisticalfactorswithspecificeconomicfactors andtheresultantmodelshouldhaveaneconomicbasiswhile stillretainingmucho ...
The costs of going from the APM to a macroeconomic multifactormodelcanbetraceddirectlytotheerrorsthatcan bemadeinidentifyingthef ...
Whichofthesemodelsworksthebest?Isbetaagoodproxy for risk and is it correlated with expected returns? The answerstothesequestions ...
Thecostofequityistherateofreturnthatinvestorsrequireto makeanequityinvestmentinafirm.Alloftheriskandreturn models described in t ...
expectedreturnoverafive-yearperiodandthatyouwanta risk-freerate.Asix-monthTreasurybillrate,whiledefault free,willnotberiskfree,b ...
estimated.Thisalsoimpliesthatitisnotwhereanasset or firmis domiciledthat determinesthechoice of a risk-free rate,butthecurrencyi ...
Our discussion, hitherto, has been predicated on the assumptionthatgovernmentsdonotdefault,atleastonlocal currency borrowing. Th ...
nominalBrazilianreals(BR),is 12 percentandthat the local currency rating assigned to the Brazilian government isBBB.Ifthedefault ...
(whentheeconomyisdoingwell,investorstendtobemuch more willing to take risk) and recent experiences in the market (risk premiums ...
Sincethepremium isaweighted averageof thepremiums demandedbyindividualinvestors,oneapproachtoestimating thispremiumistosurveyinv ...
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