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

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

ISBN: 9783631614013
Publisher: Peter Lang GmbH, Internationaler Verlag der Wissenschaften
Edition: New edition
Publication Date: 2011-03-15
Number of pages: 444
Any used item that originally included an accessory such as an access code, one time use worksheet, cd or dvd, or other one time use accessories may not be guaranteed to be included or valid. By purchasing this item you acknowledge the above statement.
$120.19

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.

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