Is the market risk premium a parameter
Is the market risk premium a parameter, for the world economy or for the national economy?
Expert
No. This risk premium is the return differential (above the return which can be acquired by investing in government bonds) which an investor needs for stock market investment. This is not a characteristic parameter of an economy as everyone has his own risk premium. The average market risk premium value is unknown and this cannot be considered as being the one of a representative investor.
When valuing the shares of my company, I calculate the present value of the expected cash flows to shareholders moreover I add to the result obtained cash holdings and liquid investment. Is that correct?
If the model could not even find bond prices right, how could this hope to accurately value bond options?
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Could we explain that the shares’ value is intangible?
Is book value the excellent proxy to the value of the shares?
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What are Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)?
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