Sound is unfortunately to low, my question would be what is the so called market? Stoxx50, s&p500, msci world? What is the risk free rate? Yield of 10y us government treasury bonds?
The market should be the SAME as that which the company is listed. So use STX500 for companies listed in Europe and the ECB 10 year yield, or the S&P500 for companies listed in the US and the USFed 10 year yield etc. Apologies for low sound!
@@MichaelWardFinance Thank you for your answer Michael, however I can't understand your answer so well why. Because if you are a world investor, isn't the relevant market also the world market? By the way as far as I know there is no such thing like an ECB 10 yr yield, u can buy European government bonds of countries like Germany, France, Italy, etc.. Keep up the great work.
@@Kig_Ama It's the currency that matters. If a share is listed in Johannesburg (say) the returns on the share are in ZAR, so to estimate the beta we need JSE returns in ZAR, and for the CAPM a market risk premium in ZAR (still about 6%), and RfR in ZAR. Using the CAPM we then get the required return in ZAR - which is appropriate for investors in the share listed on the JSE etc. Because interest rates (inflation) are much higher in emerging markets than in EUR or USD etc. we must make sure all the parameters in the CAPM are based on the appropriate currency of the listed company.
@@MichaelWardFinance Thank you, I don't want to bother you too much, your point I can understand, but the money you have you can also invest risk free in US bonds and determine the risk of a stock in South Africa in relation to the world market based on a beta or not? As a world investor, it would be possible to invest the money risk-free anywhere in the world and use the world market as a benchmark. The ZAR can be converted into US dollars and thus invested in US bonds. What am I doing wrong here? In my opinion, this would theoretically be the CAPM approach. Sorry that I may be annoying here.
Sound is unfortunately to low, my question would be what is the so called market? Stoxx50, s&p500, msci world? What is the risk free rate? Yield of 10y us government treasury bonds?
The market should be the SAME as that which the company is listed. So use STX500 for companies listed in Europe and the ECB 10 year yield, or the S&P500 for companies listed in the US and the USFed 10 year yield etc. Apologies for low sound!
@@MichaelWardFinance Thank you for your answer Michael, however I can't understand your answer so well why. Because if you are a world investor, isn't the relevant market also the world market? By the way as far as I know there is no such thing like an ECB 10 yr yield, u can buy European government bonds of countries like Germany, France, Italy, etc.. Keep up the great work.
@@Kig_Ama It's the currency that matters. If a share is listed in Johannesburg (say) the returns on the share are in ZAR, so to estimate the beta we need JSE returns in ZAR, and for the CAPM a market risk premium in ZAR (still about 6%), and RfR in ZAR. Using the CAPM we then get the required return in ZAR - which is appropriate for investors in the share listed on the JSE etc. Because interest rates (inflation) are much higher in emerging markets than in EUR or USD etc. we must make sure all the parameters in the CAPM are based on the appropriate currency of the listed company.
@@MichaelWardFinance Thank you, I don't want to bother you too much, your point I can understand, but the money you have you can also invest risk free in US bonds and determine the risk of a stock in South Africa in relation to the world market based on a beta or not? As a world investor, it would be possible to invest the money risk-free anywhere in the world and use the world market as a benchmark. The ZAR can be converted into US dollars and thus invested in US bonds. What am I doing wrong here? In my opinion, this would theoretically be the CAPM approach. Sorry that I may be annoying here.
Your audio is way too low to bother trying to decipher. Thanks anyway.