Valuation is the discipline of estimating the value of financial securities, such as stocks an bonds, by fundamental analysis of financial statements.
The Valuation Process
“Graham & Dodd and Modern Financial Analysis” by Joseph Calandro, Jr. PwC & the University of Connecticut. December 13, 2011.
The Equity Premium
According to Wikipedia:
“In the equity market the risk premium is the expected return of a company stock, a group of company stocks, or a portfolio of all stock market company stocks, minus the risk-free rate. The return from equity is the sum of the dividend yield and capital gains. The risk premium for equities is also called the equity premium. Note that this is an unobservable quantity since no one knows for sure what the expected rate of return on equities is. Nonetheless, most people believe that there is a risk premium built into equities, and this is what encourages investors to place at least some of their money in equities.”
– Read the complete article
List of Articles on the equity risk premium
- “Estimating Equity Risk Premiums” by Aswath Damodaran, Stern School of Business
- “Global Evidence on the Equity Risk Premium” by Dimson, Marsh and Staunton, London Business School (2002)
- “Equity Risk Premium” article by Michael Annin in Valuation Strategies (1998)
- “History and the Equity Risk Premium” by William N. Goetzman and Roger Ibbotson, Yale School of Management (2005)
- “Country and Industry Equity Risk Premia in the Euro Area: An Intertemporal Approach” by Lorenzo Cappiello, Marco Lo Duca and Angela Maddaloni (2008)
- “Market Risk Premium Used in 2010 by Analysts and Companies: A Survey with 2,400 Answers” by Pablo Fernandez and Javier Del Campo Baonza (2010)
- “Long-Run Stock Returns: Participating in the Real Economy” by Roger Ibbotson and Peng Chen (2003)
- “Equity risk premium: Expectations Great and Small” by Richard A. Derrig and Elisha D. Orr (2003)
- “The Implied Equity Risk Premium – An Evaluation of Empirical Methods” by David Schroder, Bonn Graduate School of Economics
Professor Damodaran on Valuation
- Pr. Damodaran on valuation (homepage) (valuation)
- Models of risk and return (including alternatives to CAPM) (link)
- Valuation of Unfunded Pension Liabilities
- Damodaran on simulations, sensitivity analysis and decision trees
Famous Security Valuation Write-Ups
- Schroeder A. & Lapin G. (1999). Berkshire Hathaway. The Ultimate Conglomerate Discount. PaineWebber. (link)
- Buffett W. (1951). The Security I Like Best (link)
Academic Research on Valuation
- Andrade, G.(1999) Do Appearances Matter? The Impact of EPS Accretion and Dilution on Stock Prices (link)
- Damodaran, A. 2005. The Value of Synergy. Stern School of Business (link)
- The Penman-Nissim model of profitability analysis
- The Profitability Factor
- 2 Studies on Spin-offs
