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

Musings on Markets

JANUARY 28, 2024

In my last data updates for this year, I looked first at how equity markets rebounded in 2023 , driven by a stronger-than-expected economy and inflation coming down, and then at how interest rates mirrored this rebound.

Risk Premium 93

Risk Premium Beta Start-ups Equity 93

Equilest

JANUARY 3, 2023

This theory is based on the idea that several factors, including economic and market conditions, determine a stock's price. The APT is a multi-factor model that seeks to explain the behavior of stock prices based on various economic and market conditions. First, we need to estimate the factor loadings for each risk factor.

Risk Premium 40

Risk Premium Risk-free Rate Market Risk Finance 40

Musings on Markets

JANUARY 24, 2024

As we start 2024, the interest rate prognosticators who misread the bond markets so badly in 2023 are back to making their 2024 forecasts, and they show no evidence of having learned any lessons from the last year. In fact, treasury bill rates consistently rise ahead of the Fed's actions over the two years.

Treasury 52

Treasury Risk Premium Start-ups Risk-free Rate 52

Valutico

DECEMBER 12, 2023

New Emerging Market Data (From EMIS): What? 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 and existing customers can reach out to upgrade and access this valuable data that opens doors to critical insights.

Risk-free Rate 52

Risk-free Rate Risk Premium Market Risk Marketability 52

Musings on Markets

FEBRUARY 10, 2021

Capital Constrained Clearing Rate : The notion that any investment that earns more than what other investments of equivalent risk are delivering is a good one, but it is built on the presumption that businesses have the capital to take all good investments.

Risk-free Rate 52

Risk-free Rate Risk Premium Start-ups Equity 52

Musings on Markets

FEBRUARY 11, 2023

In this section, I will begin measures of country default risk, including sovereign ratings and CDS spreads, before moving to more expansive measures of country risk before concluding with measures of equity risk premiums for countries, a pre-requisite for estimating the values of companies with operations in those countries.

Risk Premium 76

Risk Premium Start-ups Equity Marketability 76

Musings on Markets

JANUARY 27, 2022

By the end of 2021, it was clear that this bout of inflation was not as transient a phenomenon as some had made it out to be, and the big question leading in 2022, for investors and markets, is how inflation will play out during the year, and beyond, and the consequences for stocks, bonds and currencies.

Risk-free Rate 84

Risk-free Rate Treasury Price to Book Start-ups 84

Musings on Markets

AUGUST 15, 2023

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?

Risk-free Rate 80

Risk-free Rate Treasury Risk Premium Start-ups 80

Musings on Markets

MAY 6, 2022

The nature of markets is that they are never quite settled, as investors recalibrate expectations constantly and reset prices. Clearly, we are not in one of those time periods, as markets approach bipolar territory, with big moves up and down.

Risk Premium 92

Risk Premium Treasury Start-ups Equity 92

Musings on Markets

JANUARY 30, 2023

If 2022 was an unsettling year for equities, as I noted in my second data post, it was an even more tumultuous year for the bond market. The rise in rates transmitted to corporate bond market rates, with a concurrent rise in default spreads exacerbating the damage to investors.

Treasury 74

Treasury Start-ups Risk Premium Equity 74

Musings on Markets

JULY 27, 2022

The market clearly had a very different view, as the stock premiered at ? I argued then that notwithstanding the potential growth in the market, and Zomato's advantageous positioning, it was being over priced for its IPO, at ? On July 21, 2021, I valued Zomato just ahead of its initial public offering at about ? 41 per share.

Risk Premium 81

Risk Premium Start-ups Equity Marketability 81

Musings on Markets

JANUARY 8, 2022

To start the year, I returned to a ritual that I have practiced for thirty years, and that is to take a look at not just market changes over the last year, but also to get measures of the financial standing and practices of companies around the world. Happy New Year, and I hope that 2022 brings you good tidings!

Risk Premium 91

Risk Premium Start-ups Market Capitalization Corporate Finance 91

Equilest

JULY 31, 2022

In Finance - the beta represents how sensitive the stock price is concerning the market price change (index). The beta measures the return of the stock relative to the market return. For example, when the stock market goes up 1%, and the stock goes up 0.5%, then the stock beta is equal to 0.5.

Beta 40

Beta Business Valuation Finance Discounted Cash Flow 40

Musings on Markets

MARCH 25, 2021

The first quarter of 2021 has been, for the most part, a good time for equity markets, but there have been surprises. The first has been the steep rise in treasury rates in the last twelve weeks, as investors reassess expected economic growth over the rest of the year and worry about inflation. for 2021 and inflation of 2.2%

Equity 52

Equity Risk-free Rate Treasury Start-ups 52

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. Suitability and limitation. Conclusion.

Beta 52

Beta Capital Structure Risk-free Rate Weighted Average Cost of Capital 52

Musings on Markets

JANUARY 20, 2021

Investors are constantly in search of a single metric that will tell them whether a market is under or over valued, and consequently whether they should buying or selling holdings in that market. Note that nothing that I have said so far is premised on modern portfolio theory, or any academic view of risk premiums.

Risk Premium 52

Risk Premium Risk-free Rate Equity Dividends 52

Musings on Markets

JANUARY 21, 2023

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.

Equity 70

Equity Risk Premium Start-ups Dividends 70

Musings on Markets

FEBRUARY 15, 2023

Both accounting returns are computed based upon book value, not because we have suddenly developed trust in accounting, but because the objective is to estimate what investors have earned on what they originally invested in a company, rather than an updated or a marked-to market value.

Equity 52

Equity Start-ups Risk Premium Risk-free Rate 52

Musings on Markets

NOVEMBER 9, 2021

I have been writing about, and valuing, Tesla for most of its lifetime in public markets, and while it remains a company that draws strong reactions, it is also one that I truly enjoy valuing. Tesla: The Back Story I first valued Tesla in 2013 , as a "luxury automobile company" and I have valued almost every year since.

Start-ups 99

Start-ups Dividends Marketability Market Capitalization 99

Brian DeChesare

MAY 3, 2023

You usually link Revenue to market share * market size or units sold * average selling price, with expenses linked to Capacity, unit sales, or another top-level driver. The basic set of steps looks like this: Step 1: Forecast Revenue and Expenses This is the same as in any other 3-statement model or DCF.

Dividends 64

Dividends Terminal Value Enterprise Value Equity 64

ThomsonReuters

MAY 6, 2021

An entity may draw from its own experience as well as that of its peers, industry, geography, market, or other pertinent source. The Codification often provides guidance on how to select a discount rate for a particular area of accounting. The risk premium may incorporate factors such as credit risk or market illiquidity.

Discounted Cash Flow 52

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

Musings on Markets

FEBRUARY 8, 2022

In the first few weeks of 2022, we have had repeated reminders from the market that risk never goes away for good, even in the most buoyant markets, and that when it returns, investors still seem to be surprised that it is there.

Risk Premium 67

Risk Premium Beta Start-ups Equity 67

Musings on Markets

JANUARY 12, 2021

I take the point of view that uncertainty should not stop you from valuing companies, that your value estimates will have more error in them, but since the market also faces the same uncertainty, your best bargains may be in the midst of uncertainty. That tells me three things.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

Musings on Markets

JANUARY 5, 2024

Thus, looking at only the companies in the S&P 500 may give you more reliable data, with fewer missing observations, but your results will reflect what large market cap companies in any sector or industry do, rather than what is typical for that industry.

Dividends 98

Dividends Risk Premium Equity Book Value 98

Musings on Markets

MAY 24, 2021

As we approach the mid point of 2021, financial markets, for the most part, have had a good year so far. All of these measures, no matter how carefully designed, give a measure of inflation in the past, and markets are ultimately concerned more with inflation in the future.

Treasury 55

Treasury Start-ups Risk Premium Price to Book 55

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 79

Equity Book Value Start-ups Corporate Finance 79

Musings on Markets

JANUARY 26, 2023

My last valuation of Tesla was in November 2021, towards its market peak, and given its steep fall from grace, in conjunction with Elon Musk's Twitter experiment, it is time for a revisit.

Start-ups 80

Start-ups Marketability Risk Premium Equity 80

Musings on Markets

FEBRUARY 2, 2023

The first of the is as companies scale up, there will be a point where they will hit a growth wall, and their growth will converge on the growth rate for the economy. In short, I am assuming that the price cuts and cost pressures of the fourth quarter are more representative of what Tesla will face in the future, as competition steps up.

Start-ups 99

Start-ups Risk-free Rate Market Capitalization Marketability 99

Valutico

OCTOBER 20, 2022

The important figure there is r, which we’re using as the discount rate in this whole equation. But here, we use what interest we could get from an alternative investment in the market, called the Market Rate. This is the rate of return you’d get if you invested your money today instead. . Rf = Risk-free Rate.

Discounted Cash Flow 52

Discounted Cash Flow Terminal Value Weighted Average Cost of Capital Net Present Value 52

Musings on Markets

JULY 25, 2023

The other is pragmatic , since it is almost impossible to value a company or business, without a clear sense of how risk exposure varies across the world, since for many companies, either the inputs to or their production processes are in foreign markets or the output is outside domestic markets.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52