professor i think the practice of giving the risk premium based on where you are incorporated isnt wrong, i think it has a logic because the goverment can treat you or tax you anyway you want and that's a risk, they can even steal your buisness if they want. The revenues are one thing but i think we should take into account that a businesses incorporated in Kongo and getting the revenue from USA has a different risk from a businesses incorporated in USA and gets revenue from USA. If i had to choose one i would prefer to chose the incorporated option. Besides its easier and if its the one is being used by the majority then this is a no brainer.
Dear professor. Thank you for sharing your knowledge. Your content is priceless. I am trying to follow your MBA spring 2020 valuation class on RUclips, but it looks like some of your lectures are being cut before it actually ends. If possible, could you verify the recordings? Thank you very much
I've been switching between undergraduate and graduate classes for this reason... but this particular session it appears both the playlists were cut. Undergrad: ruclips.net/p/PLUkh9m2BorqkuWvvYH30HoAG8WwZfN6pK&app=desktop Grad: ruclips.net/p/PLUkh9m2BorqlvUMO3nMwXOG-VIqxmAh3t
Dear Professor, many thanks for sharing all this. I just have one question on this session, if I'm valuing a European company in Euros, how can I translate your Country Risk Premiums which are based on the spread vs US risk free rate? During the class, a student asked the same question and you suggest to do everything in dollar, but what if I wanted to carry the analysis out in euro terms?
I think there is no need to convert CRPs. Directly calculate CRP. Default spread of your country * Ratio of std. dev. of the country equity and Std. dev. of the country bond. P.S.- Check whether your country has zero CRP because many companies in Europe have zero CRP.
When calculating the yield why would you use (div + buybacks) instead of FCF? The market is still going to value cash that a company is generating and accruing on it's balance sheet even if it isn't paying that out right? In addition, some company's may be paying out more than 100% of FCF so that should be discounted going forward right? Maybe the thought is this balances out but it would seem to me that it's more exact to go with FCF instead of (div + buy backs). I would love to get your thoughts there Prodessor. Thanks
I believe the reason is because the markets value the excess free cash flow generated in its share price. So, if you add the excess free cash flow in your calculations, you would end up double counting.
If a company is an MNC and has its revenues spread across countries reflecting different risk profiles it is going to show up in its beta. People who would be trading that particular stock will be aware of the firm's diverse operations, and if it has 90% of its operations in Afghanistan, the volatility of the stock will be in accordance to it. Equity risk premium simply means how much i should be compensated for not investing in the safest asset of a particular currency and instead investing in equity. Hence, as we will be taking the risk free asset of a particular currency, the risk premium also should be of that particular currency's equity market. The additional volatility, whatever it is because of global operations, will be reflected in the stock's beta and therefore in the overall valuation. What if the Brazilian companies had 97% of its revenues in USD and 100% of its manufacturing/Production facilities in Brazil?
This is so interesting, I’m reading aswath’s little book of intrinsic valuation while simultaneously watching this series of videos
professor i think the practice of giving the risk premium based on where you are incorporated isnt wrong, i think it has a logic because the goverment can treat you or tax you anyway you want and that's a risk, they can even steal your buisness if they want. The revenues are one thing but i think we should take into account that a businesses incorporated in Kongo and getting the revenue from USA has a different risk from a businesses incorporated in USA and gets revenue from USA. If i had to choose one i would prefer to chose the incorporated option. Besides its easier and if its the one is being used by the majority then this is a no brainer.
Dear professor. Thank you for sharing your knowledge. Your content is priceless. I am trying to follow your MBA spring 2020 valuation class on RUclips, but it looks like some of your lectures are being cut before it actually ends. If possible, could you verify the recordings? Thank you very much
I've been switching between undergraduate and graduate classes for this reason... but this particular session it appears both the playlists were cut.
Undergrad: ruclips.net/p/PLUkh9m2BorqkuWvvYH30HoAG8WwZfN6pK&app=desktop
Grad: ruclips.net/p/PLUkh9m2BorqlvUMO3nMwXOG-VIqxmAh3t
Dear Professor, many thanks for sharing all this. I just have one question on this session, if I'm valuing a European company in Euros, how can I translate your Country Risk Premiums which are based on the spread vs US risk free rate? During the class, a student asked the same question and you suggest to do everything in dollar, but what if I wanted to carry the analysis out in euro terms?
I think there is no need to convert CRPs. Directly calculate CRP. Default spread of your country * Ratio of std. dev. of the country equity and Std. dev. of the country bond.
P.S.- Check whether your country has zero CRP because many companies in Europe have zero CRP.
Does anyone have the link to the 100+ pages document Prof. Damodaran mentions towards the end of the lecture? Thanks in advance.
papers.ssrn.com/sol3/papers.cfm?abstract_id=3378246
When calculating the yield why would you use (div + buybacks) instead of FCF? The market is still going to value cash that a company is generating and accruing on it's balance sheet even if it isn't paying that out right? In addition, some company's may be paying out more than 100% of FCF so that should be discounted going forward right? Maybe the thought is this balances out but it would seem to me that it's more exact to go with FCF instead of (div + buy backs). I would love to get your thoughts there Prodessor. Thanks
I believe the reason is because the markets value the excess free cash flow generated in its share price. So, if you add the excess free cash flow in your calculations, you would end up double counting.
@@aswathkumar2869 I would think maybe it's assumed to be the portion that is needed to create the fwd growth
If all oil producing countries have some country risk premiums, then, why US being the largest oil producer still has no country risk premium?
If a company is an MNC and has its revenues spread across countries reflecting different risk profiles it is going to show up in its beta. People who would be trading that particular stock will be aware of the firm's diverse operations, and if it has 90% of its operations in Afghanistan, the volatility of the stock will be in accordance to it. Equity risk premium simply means how much i should be compensated for not investing in the safest asset of a particular currency and instead investing in equity. Hence, as we will be taking the risk free asset of a particular currency, the risk premium also should be of that particular currency's equity market. The additional volatility, whatever it is because of global operations, will be reflected in the stock's beta and therefore in the overall valuation. What if the Brazilian companies had 97% of its revenues in USD and 100% of its manufacturing/Production facilities in Brazil?
S&P is way overvalued.. There are better opportunities in China, India and Russia as of this moment.
Heard someone coughin in the class. I hope everyone is fine.
lol