AbstractThe following sections are included:Equity Risk Premiums: Importance and DeterminantsWhy Does the Equity Risk Premium Matter?A price for riskExpected returns and discount ratesInvestment and policy implicationsWhat are the Determinants of Equity Risk Premiums?Risk aversion and...

Valuation lies at the heart of much of what we do in finance, whether it is the study of market efficiency and questions about corporate governance or the comparison of different investment decision rules in capital budgeting. In this paper, we consider the theory and evidence on valuation...

Valuing banks, insurance companies and investment banks has always been difficult, but the rolling market crises of the last few years has elevated the concern to the top of the list of valuation issues. The problems with valuing financial service firm stem from two key characteristics. The...

In traditional valuation models, we begin by forecasting earnings and cash flows and discount these cash flows back at an appropriate discount rate to arrive at the value of a firm or asset. This task is simpler when valuing firms with positive earnings, a long history of performance and a large...

The parameters of the return process of a firm are determined by two elements—the <italic>natural event structure</italic>, i.e., the process by which nature affects the value of the firm, and the <italic>information structure</italic>, i.e., the process by which information about these events is collected and disseminated to...

There is substantial evidence that insider trading is present around corporate announcements and that this insider trading is motivated by private information. Using real estate investment trusts that choose to reappraise themselves as our sample, we establish that the appraisals contain...

Over the last three decades, the capital asset pricing model has occupied a central and often controversial place in most corporate finance analysts’ tool chests. The model requires three inputs to compute expected returns – a riskfree rate, a beta for an asset and an expected risk premium...

The last two decades have seen a stream of innovation in financial markets, especially in corporate bonds. Some of these innovations-notably, hybrid debt-have provided firms with more flexibility in designing cash flows on borrowings, allowing them to match cash flows on financing more closely...