Musings on Markets

JANUARY 19, 2022

The results are similar if you break stocks down based upon price to book ratios or revenue growth rates. The Implied ERP - Start of 2022 I have computed the implied equity risk premium at the start of every month, since September 2008, and during crisis periods, I compute it every day.

Risk Premium 80

Risk Premium Risk-free Rate Start-ups Equity 80

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

MARCH 19, 2022

The overriding message in all of this data is that Russia/Ukraine war has unleashed fears in the bond market, and once unleashed that fear has pushed up worries about default and default risk premia across the board.

Start-ups 100

Start-ups Risk Premium Equity Market Capitalization 100

Musings on Markets

JANUARY 9, 2021

Consider, for instance, an investor who picks stocks based upon price to book ratios, who finds a stock trading at a price to book ratio of 1.5. In the same dataset where I compute historical equity risk premiums, I report historical returns on corporate bonds in two ratings classes (Moody’s Aaa and Baa ratings).

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Musings on Markets

MARCH 25, 2021

The second and more powerful factor is that the reason that a central bank is able to signal to markets, only if it has credibility, since the signal is more about what the Fed sees, using data that only it might have, about inflation and real growth in the future. Risk premiums No effect or even a decrease.

Equity 52

Equity Risk-free Rate Treasury Start-ups 52

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.

Marketability 95

Marketability Risk Premium Start-ups Treasury 95

Musings on Markets

MAY 24, 2021

In a sign of how volatile inflation expectations have been over the last year, I looked at the probabilities that the Federal Reserve Bank of St. Consequently, as inflation increases, equity risk premiums will tend to increase. Louis estimates for inflation rates exceeding 2.5%

Treasury 55

Treasury Start-ups Risk Premium Price to Book 55