ValueTrust has released the seventh edition of its “European Capital Market Study,” a comprehensive compilation of capital market parameters such as cost of capital and implied as well as historical risk premiums for European countries. The study, written by ValueTrust’s Professor Dr. Christian Aders, Florian Starck, and Marion Swoboda-Brachvogel, also includes trading multiples and total shareholder returns across a wide range of industries.

This index includes the UK, Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Sweden, and Switzerland. Data for CAPM analyses are available here for 10 industrial sectors: financials, basic materials, consumer cyclicals, real estate, industrials, consumer noncyclicals, healthcare, technology, utilities, and energy.

Here are a few key findings:

• The risk-free rate declined from 0.21% as of Dec. 31, 2019, to -0.14% as of Dec. 31, 2020, the further decline in 2020 largely being the consequence of measures the European Central Bank took to fight the COVID-19 crisis;
• After reaching the highest market-value weighted mean, at 9.0%, as of Dec. 31, 2018, the implied European market return decreased to 7.0% as of Dec. 31, 2020. Overall, the implied market return decreased to the lowest level within the study’s observation period; and
• The technology sector showed the highest multiples on average, followed by the industrials sector; the financial sector continues to have the least expensive valuation level of all sectors.