Musings on Markets

JULY 1, 2022

And Consequences If you are wondering why you should care about risk capital's ebbs and flows, it is because you will feel its effects in almost everything you do in investing and business. The 2008 banking and market crisis caused a drop of almost 50% in 2009, and it took the market almost five years to return to pre-crisis levels.

Marketability 88

Marketability Risk Premium Start-ups Equity 88

Musings on Markets

MARCH 25, 2021

The first quarter of 2021 has been, for the most part, a good time for equity markets, but there have been surprises. Those rates stayed low through the rest of 2020, even as equity markets recovered and corporate bond spreads fell back to pre-crisis levels. Risk premiums No effect or even a decrease.

Equity 52

Equity Risk-free Rate Treasury Start-ups 52

Simply Treasury

AUGUST 2, 2022

The idea is not new to encourage companies to increase their capitalization and reduce their bank debt (partly through more recourse to the capital market - CMU project). DEBRA Proposal (« Debt-Equity Bias Reduction Allowance). DEBRA Proposal (« Debt-Equity Bias Reduction Allowance). Two major axes.

Equity 52

Equity Risk Premium Banking Finance 52

Musings on Markets

JANUARY 21, 2023

In this post, I will begin by chronicling the damage done to equities during 2022, before putting the year in historical context, and then examine how developments during the year have affected expectations for the future. Actual Returns Your returns on equities come in one of two forms. Stocks: The What?

Equity 70

Equity Risk Premium Start-ups Dividends 70

Brian DeChesare

MAY 3, 2023

But people who aim for investment banking roles are very much into those bells and whistles, so questions about the DDM and other “exotic” methodologies began rolling in. To be fair, in some industries – like commercial banks and insurance within FIG – the DDM is a core valuation methodology.

Dividends 64

Dividends Terminal Value Enterprise Value Equity 64

Musings on Markets

MARCH 19, 2022

In this section, I will begin by looking at the bond market effects and then move on to equities and other asset classes, starting by looking at the localized reaction (for Ukranian and Russian securities) and then the global ripple effects. As Russian equities have imploded, the ripple effects again are being felt across the globe.

Start-ups 100

Start-ups Risk Premium Equity Market Capitalization 100

Musings on Markets

FEBRUARY 27, 2023

To fund the business, you can either use borrowed money (debt) or owner's funds (equity), and while both are sources of capital, they represent different claims on the business. Even government-owned businesses fall under its umbrella, with the key difference being that equity is provided by the taxpayers.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Musings on Markets

JANUARY 27, 2022

While we have increasingly given central banks primacy in discussions of interest rates, it remains my view that markets set rates, and while central banks can nudge market expectations, they cannot alter them.

Risk-free Rate 84

Risk-free Rate Treasury Price to Book Start-ups 84

Musings on Markets

JANUARY 9, 2021

The second was that, starting mid-year in 2020, equity markets and the real economy moved in different directions, with the former rising on the expectations a post-virus future, and the latter languishing, as most of the world continued to operate with significant constraints.

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Andrew Stolz

MARCH 20, 2020

A firm uses a mix of equity and debt to minimize the cost of capital. In general, the cost of debt is lower than the cost of equity due to the tax advantage of debt. A firm borrows from banks or bondholders and it has to pay the interest. The popular method to find the cost of equity is the Capital Asset Pricing Model (CAPM).

Beta 52

Beta Capital Structure Risk-free Rate Weighted Average Cost of Capital 52

Musings on Markets

AUGUST 15, 2023

Expected returns for Risky Investments : The risk-free rate becomes the base on which you build to estimate expected returns on all other investments. For instance, if you read my last post on equity risk premiums , I described the equity risk premium as the additional return you would demand, over and above the risk free rate.

Risk-free Rate 80

Risk-free Rate Treasury Risk Premium Start-ups 80

Musings on Markets

JULY 17, 2023

In my second data update post from the start of this year , I looked at US equities in 2022, with the S&P 500 down almost 20% during the year and the NASDAQ, overweighted in technology, feeling even more pain, down about a third, during the year. trillion below their values from the start of 2022. that was lost last year.

Marketability 95

Marketability Risk Premium Start-ups Treasury 95

Musings on Markets

FEBRUARY 16, 2024

Minuses : As in the last approach, you still have to estimate a probability that a catastrophe will occur, and in addition, and there can be challenges in estimating the value of a business, if the company fails in the face of catastrophic risk. 4 & 5 Uninsurable Risk. Note that these higher discount rates apply in both scenarios.

Risk Premium 74

Risk Premium Start-ups Beta Marketability 74

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 79

Equity Book Value Start-ups Corporate Finance 79

Musings on Markets

JANUARY 27, 2021

In my last post , I described the wild ride that the price of risk took in 2020, with equity risk premiums and default spreads initially sky rocketing, as the virus led to global economic shutdowns, and then just as abruptly dropping back to pre-crisis levels over the course of the year.

Start-ups 52

Start-ups Marketability Equity Treasury 52

Musings on Markets

MAY 24, 2021

Looking at US equities, the S&P 500 is up about 11% and the NASDAQ about 5%, from start of the year levels, and the underperformance of the latter has led to a wave of stories about whether this is start of the long awaited comeback of value stocks, after a decade of lagging growth stocks.

Treasury 55

Treasury Start-ups Risk Premium Price to Book 55

Appraisal Rights

JUNE 5, 2017

Further to our prior post about Delaware’s two new appraisal decisions, SWS Group was a small, struggling bank holding company that merged on January 1, 2015 into one of its own substantial creditors, Hilltop Holdings. Stockholders of SWS received a mix of cash and Hilltop stock worth $6.92 at closing. below the merger price.

Beta 40

Beta Risk Premium Capital Structure Discounted Cash Flow 40

Musings on Markets

JULY 25, 2023

Investors in Saudi Arabia are still exposed to significant risks from political upheaval or unrest, and may prefer a more comprehensive measure of country risk. For three decades, I have wrestled with measuring this additional risk exposure and converting that measurement into an equity risk premium, but it remains a work in progress.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52

Musings on Markets

MARCH 28, 2022

If these ESG revisionists are to be believed, if companies had adopted ESG early enough, there would have been no banking crisis in 2008, and if investors had screened stocks for ESG quality, they would not have lost money in the corporate scandals and meltdowns of the last decade.

Start-ups 113

Start-ups Alpha Marketability Risk Premium 113