Damodaran posts his data update for 2023

BVWireIssue #244-2
January 18, 2023

cost of capital
cost of capital, discount rate, equity risk premium, private company valuation, risk analysis, cost of equity

At the beginning of each year, Professor Aswath Damodaran (New York University Stern School of Business) generously posts a great amount of data on his website that include risk-free rates, equity risk premiums (ERPs), corporate default spreads, corporate tax rates, country risk premiums, and other data—all of which are free. He does a series of posts on his blog based on these new data, which contain his thoughts on what the data are best suited for and some caveats for users. His first post explains some of these data and gives the background of his annual analysis.

Implied ERP at 5.94%. For the ERP, Damodaran uses a forward-looking method known as the “implied” ERP as opposed to the “historical” ERP. He backs this number out from the current market prices and expected future cash flows, which gives an internal rate of return for equities that is analogous to the yield to maturity on a bond. He estimates the implied ERP in the U.S. to be 5.94% as of Jan. 1, 2023. His spreadsheet of ERP and country risk premia is available if you click here.

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