Musings on Markets

JANUARY 6, 2023

Check rules of thumb : Investing and corporate finance are full of rules of thumb, many of long standing. When valuing or analyzing a company, I find myself looking for and using macro data (risk premiums, default spreads, tax rates) and industry-level data on profitability, risk and leverage. Goodwill & Impairment 4.

Risk Premium 52

Risk Premium Dividends Start-ups EBITDA 52

Musings on Markets

NOVEMBER 9, 2021

In this post , I argued that one of the key dividing lines between the two groups was flexibility , with companies with more flexible investing, financing and dividend policies winning out over companies with more rigidity on those dimensions. for mature markets.

Start-ups 101

Start-ups Dividends Marketability Market Capitalization 101

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 82

Equity Book Value Start-ups Corporate Finance 82

Musings on Markets

JANUARY 9, 2021

The first is that I do not have a macro focus, and my interests in macro variables occur only in the context of corporate finance or valuation issues. 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

JANUARY 12, 2021

Corporate Finance : Corporate finance is the development of the first financial principles that govern how to run a business. It is that mission that makes corporate finance the ultimate big picture class, one that everyone (entrepreneurs, investors, analysts, business observers) should take. Of course, but with two caveats.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

Equilest

MARCH 17, 2022

They give a vision of the company, which must be supplemented by other approaches to address the "true" price, which will result from the negotiation, i.e., the amount accepted by the assignor and financed by the buyer. . . Thus two companies with the same level of results but different future performance risks will have different values.

Business Valuation 40

Business Valuation EBIT Discounted Cash Flow EBITDA 40

Valutico

FEBRUARY 13, 2025

In the world of finance and investing, the concept of beta plays a vital role in assessing an investment’s risk and volatility. Beta, in finance, is a measure of a stock or portfolio’s sensitivity to market movements. What is beta and how do you calculate beta?

Beta 52

Beta Covariance Risk-free Rate Specific Risk 52

Musings on Markets

JANUARY 19, 2022

When you augment this price change with the dividends on the index during 2021, the total return on the S&P 500 for 2021 was 28.47%. With equities, the cash flows take the form of dividends and buybacks, and in addition to estimating them using future growth rates, you have to assume that they continue in perpetuity.

Risk Premium 99

Risk Premium Risk-free Rate Start-ups Equity 99

Musings on Markets

JANUARY 28, 2024

In this post, I look at risk, a central theme in finance and investing, but one that is surprisingly misunderstood and misconstrued. That said, and notwithstanding decades of research and debate on the topic, there are still wide differences in how risk is defined and measured. What is risk?

Risk Premium 121

Risk Premium Beta Start-ups Equity 121

Musings on Markets

JANUARY 8, 2022

That said, it is my experience with markets that has also made me skeptical about the over selling of both notions, since we have an entire branch of finance (behavioral finance/economics) that has developed to explain how more data does not always lead to better decisions and why crowds can often be collectively wrong.

Risk Premium 99

Risk Premium Start-ups Market Capitalization Corporate Finance 99

Musings on Markets

MAY 11, 2021

The Taxation of Investment Income In much of the world, income from investments (interest, dividends) is treated differently than earned income (salary, wages), by the tax code, and the reasons for the divergence are both practical and political: 1.

Dividends 52

Dividends Start-ups Risk Premium Treasury 52

Musings on Markets

APRIL 20, 2025

There are strands of research in both behavioral finance and empirical studies that back up contrarian strategies, but as with everything to do with investing, it comes with caveats and constraints. Contrarian Investing: The Psychological Tests! In the abstract, it is easy to understand the appeal of contrarian investing.

Start-ups 136

Start-ups Price to Book Marketability Equity 136

Musings on Markets

FEBRUARY 23, 2025

Equity is cheaper than debt: There are businesspeople (including some CFOs) who argue that debt is cheaper than equity, basing that conclusion on a comparison of the explicit costs associated with each interest payments on debt and dividends on equity.

Equity 77

Equity EBITDA Risk Premium Gross Debt 77

Musings on Markets

MARCH 15, 2025

Thus, my estimates of equity risk premiums, updated every month, are not designed to make big statements about markets but more to get inputs I need to value companies. In the table below, I show my estimates of the implied equity risk premium for the S&P 500 at the start of every month, since January 2024, and on March 14, 2025.

Start-ups 132

Start-ups Risk Premium Marketability Equity 132