Valutico
FEBRUARY 27, 2024
Capital Asset Pricing Model (CAPM): According to CAPM, the expected return on a stock has two main components: the risk-free rate and a risk premium. The risk-free rate represents the return an investor can get without taking on any risk, typically derived from government bonds.
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.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Andrew Stolz
AUGUST 5, 2020
If an investor moves money from the risk-free asset into the stock market, they should expect to earn a return in excess of the risk-free rate, what is called an equity risk premium. Investments are exposed to two types of risk: systematic and unsystematic. beta of a stock). E(r) = Rf + ??(Rm
Musings on Markets
FEBRUARY 10, 2021
From a hurdle rate perspective, this implies that companies, where the marginal investors (who own a lot of stock and trade that stock) are diversified, should incorporate only macroeconomic or market risk into hurdle rates. as mature markets. More on that issue in a future data update post.)
Andrew Stolz
MARCH 20, 2020
The formula implies the return an investor expects from a risk-free investment plus the return from the stock in relation to market volatility. The market risk premium is calculated from a market rate of return less a risk-free rate. Therefore, the risks of the firm are eventually increased.
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.
Expert insights. Personalized for you.
52 
Let's personalize your content