|
Archive@NYU >
Stern School of Business >
Salomon Center >
Credit & Debt Markets >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26789
|
| Title: | Estimating Risk Parameters |
| Authors: | Damodaran, Aswath |
| Issue Date: | 1999 |
| Series/Report no.: | S-CDM-99-02 |
| Abstract: | 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 for the market portfolio (over and above
the riskfree rate). Betas are estimated, by most practitioners, by
regressing returns on an asset against a stock index, with the slope of
the regression being the beta of the asset. In this paper, we attempt to
show the flaws in regression betas, especially for companies in emerging
markets. We argue for an alternate approach that allows us to estimate a
beta that reflect the current business mix and financial leverage of a firm. |
| URI: | http://hdl.handle.net/2451/26789 |
| Appears in Collections: | Credit & Debt Markets
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
