Risk
Risk Premium
In the simplest terms, the risk premium is defined as the difference in annual returns between stocks and risk-free bonds. However, measuring it in practice is not an […]
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Risk
Risk Aversion vs. Age
Research confirms that the price of capital risk is closely related to the age of investors. As investors age, their appetite for risk decreases. Consequently, the older the […]
Risk
Economic vs. Equity Risk
When examining the impact of macroeconomic factors on the price of equity risk, research sometimes yields contradictory results. For instance, a solid correlation between high inflation and market […]
Risk
Transparency & Risk Premium
A study of 41 countries (Lau, Ng, and Zhang, 2011) shows that the price of equity risk is more stable in countries with high levels of transparency. Additionally, […]
Risk
Catastrophe Risk
Does the investment market consider the consideration of catastrophic risk in Equity Risk Premium? While the likelihood of a macroeconomic catastrophe is not high, it still occurs periodically. […]
Market Efficiency
Illusion of Money
The Modigliani-Cohn Hypothesis is a significant model that describes the nonrational behavior of asset pricing and its impact on the Equity Risk Premium. According to the model, investors […]
Risk
Illusion of Risk
What does high-risk illusion and low resistance to good projects imply? #behavioralfinance The #NarrowFraming suggests that discussing investment decisions in isolation highlights the neglect of nonrational risks (Narrow […]
Risk
ERP Puzzle
In academic studies, the risk premium is usually estimated at 6-7%. However, what opinion should be expressed about the segmentation of time and calculation mechanisms, as many interpret […]
Risk
CFOs about ERP
From 2000 to 2017, a survey of 10,000 #CFOs was conducted regarding how they assess the risk premium of capital – that is, the difference between expected returns […]
Market Efficiency
Profitability of High-Risk Actives
The profitability illusion of high-risk actives: https://www.investopedia.com/ask/answers/06/geometricmean.asp
Market Efficiency
The Small-Cap Premium
The small-cap premium (if such a thing exists) typically peaks in January… It’s unexpected, but still… Equity Risk Premiums (ERP): Determinants, Estimation, and Implications – The 2022 Edition […]
Market Efficiency
The Globalization of Risk
Source:Equity Risk Premiums (ERP): Determinants, Estimation, and Implications – The 2022 Edition Updated: March 23, 2022, Aswath Damodaran; Stern School of Business
Market Efficiency
Country Factor
How should we consider the country factor when evaluating an investment project? The question addresses several important points: Diversification of risk is dependent on the specificity of the […]
Risk
Implied Equity Risk Premium
Implied Equity Risk Premium is a relative measure in finance that changes the investment philosophy and perspective… Instead of assessing capital risk with historical figures, it’s possible to […]
Derivatives
Euler’s Number
Nice video to see and recall Euler’s Number for math savvy investors: It is used to understand continuous compounding interest and in option valuations too (Black-Scholes Formula). 1. […]
Interest Rates
Interest Rate Factors
Factors Determining the Interest Rate on a Loan/Bond: i (j) = f (IP, RIR, DRPj, LRPj, SCPj, MPj) Where, Source: Financial Markets and Institutions – by A. Saunders, […]
Interest Rates
Price-Return Curve
To assess the impact of interest rate risk on bonds and other fixed income assets, measures such as Duration, Modified Duration, Dollar Duration, Effective Duration, Convexity, and Portfolio […]
Growth
Equilibrium
Interesting, that there should be an equilibrium condition among the three value fundamentals, – #g, #ROIC & #WACC. The chart would be more familiar for economists.to translate it: […]