Transcription of Estimating Risk Parameters Aswath Damodaran
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Estimating Risk Parameters Aswath Damodaran
Estimating Risk ParametersAswath DamodaranStern School of Business44 West Fourth StreetNew York, NY Risk ParametersOver the last three decades, the capital asset pricing model has occupied a central andoften controversial place in most corporate finance analysts tool chests. The modelrequires three inputs to compute expected returns a riskfree rate, a beta for an asset andan 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 astock index, with the slope of the regression being the beta of the asset.
Estimating Risk Parameters 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 ... In practice, however, there are a number of …
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