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Size effect is ‘fiction,’ Damodaran reiterates

“There has been no size premium for the past 40 years,” said Professor Aswath Damodaran (New York University Stern School of Business), who has been called the “Dean of Valuation.”

BVU News and Trends April 2021

A monthly roundup of key developments of interest to business valuation experts.

BVU News and Trends March 2021

A monthly roundup of key developments of interest to business valuation experts.

New paper on IBOR reform and valuation

For many years, interbank-offered rates (IBORs) have set the benchmark rate for lending on an unsecured basis.

BVU News and Trends February 2021

A monthly roundup of key developments of interest to business valuation experts.

Damodaran updates cost of capital data

Professor Aswath Damodaran (New York University Stern School of Business) has started his annual posting of data updates on his website that include risk-free rates, equity risk premiums, corporate default spreads, corporate tax rates, country risk premiums, and other data—all of which is free.

YE2020 data are now in the Cost of Capital Professional

Year-end 2020 data, including equity risk premia, CRSP decile size premia, and industry betas/IRPs, are now available in BVR’s Cost of Capital Professional platform.

New Research Paper Joins Call to ‘Let Go’ of the Size Premium

A look at the latest paper that joins mounting academic research over the recent past that shows that the size effect no longer exists—or was never there in the first place.

BVU News and Trends January 2021

A monthly roundup of key developments of interest to business valuation experts.

Hitchner poll reveals COEC sources of choice

The January 2021 issue of Hardball With Hitchner includes the results of polls that reveal what sources valuation practitioners use for developing cost of equity capital (COEC) estimates.

The Size Effect: Should We Care?

I read the entire edition of Business Valuation Review (Volume 37, Issue 3, Fall 2018) focused on ‘‘the size effect.’’ I have the following ‘‘big picture’’ comments after considering all four articles together and title my letter: The Size Effect: Should We Care?

Vanguard stock market forecast implies a U.S. ERP of 3% to 5%

Annual returns of U.S. stocks over the next decade are forecasted to be in the “modest 3.7%-5.7% range,” according to a recent market outlook report from Vanguard.

BVU News and Trends December 2020

A monthly roundup of key developments of interest to business valuation experts.

D&P reduces recommended U.S. ERP to 5.5%

Duff & Phelps has decreased its recommended U.S. equity risk premium (ERP) from 6.0% to 5.5% for use as of Dec. 9, 2020, according to a client alert.

Side Effect of COVID-19: Beta Changes Impacting Business Valuations

The COVID-19 pandemic is causing betas and other measures of risk commonly used in company valuations to appear to have changed. Beta is a critical component used by valuation experts when determining the discount rate in business valuation. Even small changes in betas can cause large changes in the discount rate and, consequently, can cause large changes in valuation. In this panel discussion, Dr. Roper and Cliff Ang, CFA, will describe how the COVID-19 pandemic ...

D&P enhances infographic on cost of capital

Duff & Phelps has updated its infographic, “Cost of Capital in the Current Environment,” and has enhanced it with new data on the eurozone.

The Absence of a Size Effect: Letting Go Of The Size Premium

Many valuation practitioners believe that there is a size effect and add a size premium to their CAPM cost of equity. In this talk, Cliff Ang will demonstrate why the underlying premise behind the size effect no longer holds and discuss the academic literature and empirical evidence on the absence of a size effect. He then dives into the related issue, which is why valuation practitioners should let go of the size premium.

BVU News and Trends November 2020

A monthly roundup of key developments of interest to business valuation experts.

BVU News and Trends October 2020

A monthly roundup of key developments of interest to business valuation experts.

‘The “Normalized” Risk-Free Rate: Fiction or Science Fiction?’

That’s the title of a new paper from Pablo Fernandez, a professor in the department of financial management at the University of Navarra—IESE Business School in Spain.

Article says the size effect didn’t vanish—it never existed

The hits keep coming to the existence of the size effect.

BVU News and Trends September 2020

A monthly roundup of key developments of interest to business valuation experts.

Global BVU News and Trends September 2020

Business valuation news from a global perspective.

Latest paper in the size-effect debate

Some appraisers believe that the size effect has diminished or disappeared since it was first documented in 1981.

Global BV News: New module added to Duff & Phelps Cost of Capital Navigator

A new international industry benchmarking module will be available in late October for the Duff & Phelps Cost of Capital Navigator.

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