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Musings on Markets: The Small Cap Premium: Where is the beef?

Apr 11, 2015 · While the results are interesting and can be used by active small-cap fund managers as a justification for their activity, they are in no way a basis for adding a small cap premium to every small company, and asking analysts to add it on only for small, high quality companies is problematic. In summary, if the only justification that you can ...…

Using a Non-Beta-Adjusted Size Premium in the Context of ...

Roger Ibbotson and James Harrington discuss two different ways of measuring the relative performance of small stocks versus large stocks in this article: (i) the “small stock premium” and (ii) the “beta-adjusted size premium”. Ibbotson and Harrington demonstrate why using a non-beta-adjusted size premium within the context of the capital asset pricing model (CAPM) to estimate cost of ...…

Why We Shouldn’t Add a Size Premium to the CAPM Cost of ...

Damodaran (2015) explains: “I have never used a small cap premium, [sic] when valuing a company and I don’t plan to start now. Needless to say, I am often asked to justify my non-use of a premium and here are my reasons. First, I am not convinced by either the historical data or by current market behavior that a small cap premium exists.…

How to Calculate Equity Risk Premium with the Ibbotson ...

Dec 16, 2018 · ** Since Ibbotson and Chen don’t explicitly show all of their work in the above article, you might be wondering, like I was, how they calculated an equity risk premium of 5.24%. Recall that their entire analysis is done in real terms and that this is a real (rather than nominal) premium. The return on equity (prior to subtracting the risk ...…

Business valuation and company valuation

Business valuation calculator. On our website you can choose between two different online business valuation calculators.One is for the beginner which we have named “small business valuation” and the other one is for the more experienced user which we call “advanced business appraisal“. On both these online business valuation calculators, you can value any company to find out how much ...…