Mehra and Prescott (1985) argued that, according to sensible asset pricing models, stocks should provide at most a 0.35% premium over bills. However, companies use higher equity premia (average around 6%) for evaluating their investment projects, professors use in class and in their textbooks...

We analyze the results of a recent survey of executives and finance professors. We present the required equity premium used in 2008 by 216 companies and 39 professors and their comments. The range of the 216 companies goes from 2% to 30% (average 6.3%) and the range of the 39 academics goes from...

This paper contains 100 questions that students, alumni and other persons (judges, arbitrageurs, clients') have posed to me over the past years. They were recompiled so as to help the reader remember, clarify and, in some cases, discuss some useful concepts in finance. Most of the questions have...

This document has 100 questions from students, alumnae and other persons (judges, clients,...). They are useful to clarify some useful concepts in finance. Most of the questions have a clear answer. The document also has short answers to all questions

It is well known that the cost of a call and put option is equal to its intrinsic value plus the cost of a stop loss strategy. This stop loss strategy can be re-expressed in terms of the local time. It provides easily closed forms solution for model like Black Scholes [8] or [3]. This paper...

Usually financial textbooks present the financial ratio analysis. Many courses are taught in financial analysis and teachers spend lot of efforts teaching how to calculate financial ratios. Most of them are used to analyze historical financial statements. These analyses are very useful in...

During the last 3, 5, 10 and 15 years, the average return of the equity mutual funds in Spain was 600 basis points smaller than the average return of the Spanish Index ITBM. Nevertheless, on December 31, 2006, 348,000 investors in the 120 existing equity mutual funds had 10.7 billion euros. Only...

In theory, different valuation methods, with consistent assumptions, must give identical results. Numerical examples that purport to illustrate the theory should demonstrate the identical results. Unfortunately, in popular textbooks it is all too easy to find numerical examples that are at odds...

We compute the Shareholder Value Creation of Banco Popular. The market cap of Banco Popular increased between December 1991 and December 2005 in 14.9 billion euros. The shareholder value creation during this period was 13.4 billion euros. The average shareholder return of Banco Popular in this...

We compute the Shareholder Value Creation of BBVA. The market cap of increased between December 1991 and December 2005 in 61 billion euros. The shareholder value creation during this period was 47.5 billion euros. The average shareholder return of BBVA in this 15 years was 20.1%, higher than...