Musings on Markets

OCTOBER 4, 2023

Price of Risk The drop in stock and bond prices in the third quarter of 2023 can partly be attributed to rising interest rates, but how much of that drop is due to the price of risk changing? below the index value of 4288, confirming my base case conclusion.

Marketability 123

Marketability Start-ups Risk Premium Treasury 123

Andrew Stolz

AUGUST 6, 2020

The return on assets is determined by systematic factors such as changes in inflation , risk premiums, interest rates, etc. Investors construct portfolios with unsystematic risks, which are well-diversified to reduce total portfolio risk. Inflation rate: ß = 0.6, The risk-free rate is 5%.

Risk-free Rate 52

Risk-free Rate Risk Premium Beta Marketability 52

Valutico

FEBRUARY 27, 2024

The discount rate effectively encapsulates the risk associated with an investment; riskier investments attract a higher discount rate. Different types of discount rates such as risk-free rate, cost of equity, or cost of debt, are used contextually in financial analysis.

Discounted Cash Flow 52

Discounted Cash Flow Risk Premium Risk-free Rate Beta 52

ThomsonReuters

MAY 6, 2021

The cash flows from an entire business include inflows and outflows from investing, financing, and operating activities (such as sales, collections on receivables, expenditures, and settling accounts payable). The Codification often provides guidance on how to select a discount rate for a particular area of accounting.

Discounted Cash Flow 52

Discounted Cash Flow Risk-free Rate Risk Premium Intangible Assets 52

Musings on Markets

JANUARY 5, 2024

I have also developed a practice in the last decade of spending much of January exploring what the data tells us, and does not tell us, about the investing, financing and dividend choices that companies made during the most recent year. Beta & Risk 1. Equity Risk Premiums 2. Tax rates 4. Financing Flows 5.

Dividends 106

Dividends Risk Premium Equity Book Value 106

Musings on Markets

JANUARY 30, 2023

The rise in rates transmitted to corporate bond market rates, with a concurrent rise in default spreads exacerbating the damage to investors. That view has never made sense, because central banking power over rates is at the margin, and the key fundamental drivers of rates are expected inflation and real growth.

Treasury 97

Treasury Start-ups Risk Premium Equity 97

Equilest

JULY 31, 2022

What is Beta in Finance, and why is it essential for a business valuation? Are you considering evaluating a business using an excel template without understanding Beta in Finance? In Finance - the beta represents how sensitive the stock price is concerning the market price change (index). Think again!

Beta 40

Beta Business Valuation Finance Discounted Cash Flow 40

Equilest

JANUARY 3, 2023

Finance professionals and investors have widely used this theory as a powerful tool to predict stock prices and portfolio returns. Let's say the risk-free rate is 3%, the risk premium for market risk is 5%, the risk premium for industry risk is 4%, and the risk premium for country risk is 2%.

Risk Premium 40

Risk Premium Risk-free Rate Market Risk Finance 40

Valutico

DECEMBER 12, 2023

We’ve integrated new emerging market transaction data from EMIS, a significant enhancement covered by major news outlets like Yahoo Finance and Asia One. New Emerging Market Data (From EMIS): What? New and existing customers can reach out to upgrade and access this valuable data that opens doors to critical insights. Why Important?

Risk-free Rate 52

Risk-free Rate Risk Premium Market Risk Marketability 52

Musings on Markets

JANUARY 24, 2024

Note also that during 2022 and 2023, the movements in these government bond rates mimic the US treasuries, rising strongly in 2022 and declining or staying stable in 2023. Corporate Borrowing As riskfree rates fluctuate, they affect the rates at which private businesses can borrow money.

Treasury 52

Treasury Risk Premium Start-ups Risk-free Rate 52

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

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

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 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

Musings on Markets

JANUARY 19, 2022

In a post at the start of 2021 , I argued that while stocks entered the year at elevated levels, especially on historic metrics (such as PE ratios), they were priced to deliver reasonable returns, relative to very low risk free rates (with the treasury bond rate at 0.93% at the start of 2021).

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

Equidam

APRIL 22, 2025

Discount Rates / Risk Premiums: The discount rate used in DCF analysis (often the WACC) incorporates elements sensitive to market conditions. [21] 21] [22] [24] [27] The cost of equity component includes the market risk premium the excess return investors expect for investing in the broader market over a risk-free rate.

Discounted Cash Flow 52

Discounted Cash Flow Marketability Risk Premium Start-ups 52

Equidam

APRIL 22, 2025

Venture Capital (VC) Financing: This is perhaps the most common context. 3] , [7] , [6] It sets a benchmark against which future fundraising rounds will be measured and helps investors assess whether the potential upside justifies the significant risks associated with early-stage ventures. [8]

Discounted Cash Flow 64

Discounted Cash Flow Terminal Value Marketability EBITDA 64