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:
This is a story of two friends – Katrina and Deepika. Both of them got married in the year 1980. Katrina comes from a conservative family whose members mostly "invest" their hard-earned money in a bank fixed deposit. The reason was simple – fixed deposits are “safe”. There is no fluctuation and you consistently earn interest … Continue reading Why you should think beyond fixed deposits