Estimation of the Expected Market Risk Premium for Corporate Valuations: Methodologies and Empirical Evidence for Equity Markets in Key Countries (Sch

Estimation of the Expected Market Risk Premium for Corporate Valuations: Methodologies and Empirical Evidence for Equity Markets in Key Countries (Sch

By: Hannes Gsell (author)Hardback

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Description

The expected market risk premium (MRP) is a crucial parameter for corporate valuations using risk-adjusted discount rates. Despite its importance, there is no consensus on its correct estimation. This book provides a conceptual review of several estimation methods focused on implied cost of capital but also including historical averages and return decomposition. In addition, these methods are applied in a comprehensive empirical study for six key equity markets (Canada, France, Germany, Japan, UK, and USA). While professionals predominantly rely on historical averages, the empirical results demonstrate that the expected MRP is volatile over time and related to the market price level particularly during the recent financial crisis. The findings suggest to reject the usage of unconditional historical averages and to apply conditional estimates according to the "Stichtagsprinzip" instead.

About Author

Hannes Gsell, born 1979 in Schwabisch Hall, completed his studies in business administration at WHU Otto Beisheim School of Management in 2004. Thereafter, he joined an international investment bank. He completed his doctoral studies at Ulm University in 2010.

Contents

Contents: Expected MRP estimation based on averages of ex-post returns - Expected MRP estimation based on equity valuation models using analysts' consensus estimates (implied cost of capital method) - Expected MRP estimation based on return decomposition approach - Unconditional versus conditional expected MRP estimates for corporate valuations - Conditional expected MRP estimates during the financial crisis.

Product Details

  • ISBN13: 9783631614013
  • Format: Hardback
  • Number Of Pages: 444
  • ID: 9783631614013
  • weight: 710
  • ISBN10: 3631614012
  • edition: New edition

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