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Sovereign Ratings, Default Risk and Markets: The Moody's Downgrade Aftermath!

Musings on Markets

I was on a family vacation in August 2011 when I received an email from a journalist asking me what I thought about the S&P ratings downgrade for the US. Moodys, Standard and Poors and Fitchs have been rating corporate bond offerings since the early part of the twentieth century.

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What Is Risk-Free Rate?

Andrew Stolz

Definition of Risk-Free Rate. The risk-free rate is the minimum rate of return on an investment with theoretically no risk. Government bonds are considered risk-free because technically, a government can always print money to pay its bondholders. Anticipated rate of inflation.

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In Search of Safe Havens: The Trust Deficit and Risk-free Investments!

Musings on Markets

In every introductory finance class, you begin with the notion of a risk-free investment, and the rate on that investment becomes the base on which you build, to get to expected returns on risky assets and investments. What is a risk free investment? Why does the risk-free rate matter?

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Market Bipolarity: Exuberance versus Exhaustion!

Musings on Markets

That recovery notwithstanding, uncertainties about inflation and the economy remained unresolved, and those uncertainties became part of the market story in the third quarter of 2023. The Markets in the Third Quarter Coming off a year of rising rates in 2022, interest rates have continued to command center stage in 2023.

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The Price of Risk: With Equity Risk Premiums, Caveat Emptor!

Musings on Markets

If you have been reading my posts, you know that I have an obsession with equity risk premiums, which I believe lie at the center of almost every substantive debate in markets and investing. How, you may ask, can equity risk premiums be that divergent, and does that imply that anything goes?

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Data Update 2 for 2023: A Rocky Year for Equities!

Musings on Markets

It is the nature of stocks that you have good years and bad ones, and much as we like to forget about the latter during market booms, they recur at regular intervals, if for no other reason than to remind us that risk is not an abstraction, and that stocks don't always win, even in the long term. Stocks: The What?

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What Is Equity Risk Premium?

Andrew Stolz

Definition of Equity Risk Premium. It is the difference between expected returns from the stock market and the expected returns from risk-free investments. What Impacts the Equity Risk Premium? How Do You Calculate Equity Risk Premium? Why is the Equity Risk Premium Important?