Volatility is the most widely-used measure of risk but its relevance is questionable in many settings. For long-term investors, short-term volatility is something they just have to live with and disregard as much as possible. Tail risks, however, are critical because, although rare by...

Beta has been a controversial measure of risk ever since it was proposed almost half a century ago, and we do not pretend to settle with this article what decades of research has not. We do, however, take advantage of the recent trend of investing in countries and industries through index funds...

This note, which complements the note quot;The Pricing of Internet Stocksquot; (FN-467-E), addresses two main issues: 1) Reverse valuation and 2) expected values and scenarios. Both valuation models are briefly analyzed and applied to the valuation of Yahoo, the leading Internet portal and one...

SUBJECT AREAS: Internet stocks. Stock pricing.The technical note recreates a report written by a consultant to his clients which does not attempt to justify the valuation of Internet stocks; rather, it attempts to be a map to guide unaware investors through the quot;madnessquot; of assessing the...

Retirement planning is an issue that must be tackled early and solved backward. It must be tackled early because with a few working years to go there is little that can be done if an individual is not on the right path; and it must be solved backward because it makes little sense to aim for a...

P/E ratios are one of the tools most widely-used by analysts and the key variable in many value strategies. PEG ratios, an increasingly-popular valuation tool among analysts, improve upon P/E ratios by adjusting the latter by growth. This article proposes a new tool, the PERG ratio, that adjusts...

For over 30 years academics and practitioners have been debating the merits of the CAPM. One of the characteristics of this model is that it measures risk by beta, which follows from an equilibrium in which investors display mean-variance behavior. In that framework, risk is assessed by the...

The most widely-used measure of an asset's risk, beta, stems from an equilibrium in which investors display mean-variance behavior. This behavioral criterion assumes that portfolio risk is measured by the variance (or standard deviation) of returns, which is a questionable measure of risk. The...

Recent empirical evidence has established that a measure ofdownside risk, the semideviation with respect to the mean, explains the cross section of stock returns in emerging markets, and is a plausible variable to be used in a CAPM-type model to compute costs of equity. The evidence reported in...

Every company evaluating an investment project or an acquisition in an emerging market must not only estimate future cash flows but also an appropriate discount rate. Although not free from controversy, the cost of equity in developed markets is typically estimated with the CAPM. In emerging...