Estimation of the Expected Market Risk Premium for Corporate Valuations
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A01=Hannes Gsell
Author_Hannes Gsell
Category=KFCX
Category=KFFM
Category=KJMV1
Corporate
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eq_business-finance-law
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Product details
- ISBN 9783631614013
- Weight: 710g
- Dimensions: 148 x 210mm
- Publication Date: 15 Mar 2011
- Publisher: Peter Lang AG
- Publication City/Country: CH
- Product Form: Hardback
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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.
Hannes Gsell, born 1979 in Schwäbisch 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.
