Musings on Markets
JANUARY 10, 2025
It is the end of the first full week in 2025, and my data update for the year is now up and running, and I plan to use this post to describe my data sample, my processes for computing industry statistics and the links to finding them. Beta & Risk 1. Equity Risk Premiums 2. Corporate Governance & Descriptive 1.
Musings on Markets
JUNE 2, 2025
That left Moody's, the third of the major sovereign ratings agencies, as the only one that persisted with a Aaa (Moody's equivalent of AAA) for the US, but that changed on May 16, 2025, when it too downgraded the US from Aaa (negative) to Aa1 (stable). In addition to more countries being rated, the ratings themselves have become richer.
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Musings on Markets
FEBRUARY 8, 2025
In the first five posts, I have looked at the macro numbers that drive global markets, from interest rates to risk premiums, but it is not my preferred habitat. The second set of inputs are prices of risk, in both the equity and debt markets, with the former measured by equity risk premiums , and the latter by default spreads.
Musings on Markets
APRIL 7, 2025
trillion in value last week, a 9.24% decline in value from the Friday close on March 28, 2025. In the language of risk, they are demanding higher prices for risk, translating into higher risk premiums. Those equity risk premiums did not get back to pre-2008 levels until almost 15 years later.
Musings on Markets
JANUARY 17, 2024
To capture the market's mood, I back out the expected return (and equity risk premium) that investors are pricing in, through an implied equity risk premium: Put simply, the expected return is an internal rate of return derived from the pricing of stocks, and the expected cash flows from holding them, and is akin to a yield to maturity on bonds.
Musings on Markets
OCTOBER 4, 2023
Price of Risk The drop in stock and bond prices in the third quarter of 2023 can partly be attributed to rising interest rates, but how much of that drop is due to the price of risk changing? below the actual index level of 4288, making it close to fairly valued. below the index value of 4288, confirming my base case conclusion.
Musings on Markets
JULY 17, 2023
Exacerbating the pain, corporate default spreads rose during the course of 2022: While default spreads rose across ratings classes, the rise was much more pronounced for the lowest ratings classes, part of a bigger story about risk capital that spilled across markets and asset classes.
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