In this paper we first proposed a way of measuring home bias based on portfolio holdings of investors compared with global market weights that would hold under the ICAPM. We inferred the costs to cross-border investment and compared them to actual costs and restrictions, thus identifying the...

This paper investigates the effect of uncertainty about input parameters on the accuracy of real option valuation. It compares the error from no-arbitrage valuation with the error from using DCF. Despite the theoretical superiority of no-arbitrage valuation it is shown to be less accurate than...

Evidence suggests that international capital markets are neither fully integrated nor completely segmented. There is, however, currently no general method available for computing the required return on corporate investments with such capital markets. This paper uses a model of partially...

Using a large sample of cross-border mergers we measure the effect of a change in location on systematic risk. When a target firm's location moves a large part of its systematic risk switches from being related to its home equity market to that of the acquirer. On average the change in betas is...

Using a large sample of cross-border mergers we measure the effect of a change in location on systematic risk. We document a large, widespread, and robust effect. When a target firm's location moves as a result of an international merger, a large part of its systematic risk switches from being...

We examine how the accuracy of a multiples-based valuation changes as the number of comparable firms used to estimate the valuation multiple increases. Our research is motivated by a contrast between the approach followed by practitioners, who typically use a small number of closely comparable...

In this note we discuss four common methods of valuing firms:1.Discounting operating free cash flow at the weighted average cost of capital.2.Discounting equity free cash flow at the cost of equity.3.Valuing the firm using adjusted present value.4.Discounting the capital cash flow at the...

We examine the changes in betas resulting from international mergers. We find that the beta with respect to the acquirer's home market rises and that with respect to the target's home market falls. This effect is robust with respect to controls for changes in the operations of the companies...

This paper derives a tax-adjusted discount rate formula with a constant proportion leverage policy, investor taxes, and risky debt. The result depends on an assumption about the treatment of tax losses in default. We identify the assumption that justifies the textbook approach of discounting...

Fernandez (2004a) and Fernandez (2004b) raise a series of interesting issues about the value of tax savings. However, the central claim, that the value of tax savings from debt cannot be calculated by simply taking the cash flows that arise from the tax saving and present-valuing them, is wrong....