The 2015 International Valuation Handbook - Guide to Cost of Capital includes country-level country risk premia (CRPs) and country-level equity risk premia (ERPs) that can be used to estimate country-level cost of equity capital globally, from the perspective of investors based in 55 different countries. During a recent complimentary webinar explaining how to use the book, the presenters mentioned additional sources of international equity risk premium data.
One top source is a survey that collects information about the discount rate (risk-free rate and the market risk premium) used in 2015 for 41 different countries. Pablo Fernández, Alberto Ortiz Pizarro, and Isabel Fernández Acín (all with the University of Navarra in Spain) co-authored the survey. The information is collected from professors, analysts, financial companies, and managers of nonfinancial companies.
Rate shifts: The survey found that the average risk-free rate used in 2015 was less than the one used in 2013 in 26 countries (in 11 of the countries, the difference was more than 1%). On the other hand, eight countries used an average risk-free rate in 2015 that was more than 1% higher than the one used in 2013. For the U.S., Europe, and U.K., most of the respondents use a risk-free rate that is greater than the yield for 10-year government bonds. The difference in the average market risk premium used was more than 1% for 13 countries in 2015 versus 2013.
The 2015 International Valuation Handbook - Guide to Cost of Capital, written by Duff & Phelps, is a must-have publication that includes data through March 2015 and builds on the same rigorous country-level cost of capital analysis previously published in the Morningstar/Ibbotson “international” reports.