One of the tenets of modern finance is that risk is seen from the perspective of the marginal investor. In publicly traded firms, it is highly likely that the marginal investor is well diversified and hence concerned about only about market risk. It follows therefore, that all investors must also consider only market risk no … Continue reading Why do investors not get compensated for diversifiable risk?
Equity risk premiums are useful. But can they alone tell whether the market is over- or under-valued? We take a closer look in the below article... A fellow student in the online valuation class of NYU recently requested my thoughts on a report from a top bank regarding equity risk premiums (“ERP”). The crux of … Continue reading Can equity risk premiums predict market direction?
Here's a snapshot of how to estimate a risk free rate for India:
We recently came across a question on Quora about why Prof. Damodaran subtracts “depreciation from capex when computing the reinvestment rate of a business.” It further goes on to state the following: "In his book, [Prof. Damodaran] seems to argue that depreciation is a cash inflow that pays for a part of capex, but I don't … Continue reading Why net depreciation from capex for computing reinvestment rate
What had been a fairly decent year for the equity markets till September 2016 was marred by demonetization in the last two months of the year. The markets gave up most of the gains and ended up marginally positive for the year. Nifty 500 (the index which we feel represents the broader Indian market) reached … Continue reading Demonetization Blues: Mutual Fund Performance during the latest Correction
At Capital Surge, we actively track about 50 equity mutual fund schemes by various AMCs. These funds have been shortlisted based on their ratings on Morningstar. Below, we provide a review of the best and worst of mutual fund schemes in 2016. A word of caution – this summary is purely based on the schemes' … Continue reading The Best and Worst of Mutual Funds in 2016
On 14 October, Samir Arora, founder of Helios Capital, posed the following question on his twitter account: It was a nice way of highlighting the apparent contradiction that a lot of market commentators fall into when categorising investors as short term and long term. In our view, there are simply investors on the one hand … Continue reading Long term vs. short term investors – a correct distinction?