Remove Hurdle Rate Remove Treasury Remove Valuation
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Data Update 6 for 2025: From Macro to Micro - The Hurdle Rate Question!

Musings on Markets

I spend most of my time in the far less rarefied air of corporate finance and valuation, where businesses try to decide what projects to invest in, and investors attempt to estimate business value. A key tool in both endeavors is a hurdle rate a rate of return that you determine as your required return for business and investment decisions.

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Data Update 1 for 2025: The Draw (and Danger) of Data

Musings on Markets

I know that this classification is at odds with the industry classifications based upon SIC or NAICS codes, but it works well enough for me, at least in the context of corporate finance and valuation. Since I teach corporate finance and valuation, I find it useful to break down the data that I report based upon these groupings.

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In Search of Safe Havens: The Trust Deficit and Risk-free Investments!

Musings on Markets

After the rating downgrade, my mailbox was inundated with questions of what this action meant for investing, in general, and for corporate finance and valuation practice, in particular, and this post is my attempt to answer them all with one post. and the reverse will occur, when risk-free rates drop.

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Data Update 2 for 2021: The Price of Risk!

Musings on Markets

Put simply they look at a long time period in the past (50 years or even 100 years) and look at the premium that stocks earned over a risk free investment (treasury bills or bonds); that historical risk premium then gets used as a measure of the current equity risk premium. Data Update 4 for 2021: The Hurdle Rate Question.

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Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year (2020)!

Musings on Markets

To illustrate, consider a practice in valuation, where analysts are trained to add a small cap premium to discount rates for smaller companies, on the intuition that they are riskier than larger companies. It is very likely that these rules of thumb were developed from data and observation, but at a different point in time.

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Country Risk: A July 2023 Update!

Musings on Markets

Company Hurdle Rates This post has already become much longer than I intended it to be, but I want to end by bringing these equity risk premiums down to the company level, and examining how they play out in hurdle rates, to be used in investment analysis by companies and valuation by investors.

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Transcript: Edward Chancellor

Barry Ritholtz

CHANCELLOR: And look — yeah, but then if you look at the valuation of the market at that time, the market was — the U.S. CHANCELLOR: And look — yeah, but then if you look at the valuation of the market at that time, the market was — the U.S. They’re actually just buying long dollars, treasuries.