Global BV News: Updated research on global risk premiums and risk-free rate

BVWireIssue #199-1
April 3, 2019

global business valuation
cost of capital, international business valuation, international cost of capital

In some European countries, it appears there is much more disagreement about the risk-free rate (RF) than the market risk premium (MRP), according to a new survey. “Market Risk Premium and Risk-Free Rate Used for 69 Countries in 2019: A Survey,” by Pablo Fernandez, Mar Martinez, and Isabel Fernández Acín, is based on almost 2,000 responses from finance and economics professors as well as company analysts and managers. The authors state: “Due to ‘Quantitative Easing,’ many respondents use for European countries a RF higher than the yield of the 10-year government bonds. The coefficient of variation (standard deviation/average) of RF is, on average, 2.75 times higher than the CV of MRP for 24 European countries.”
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