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- Title
Investigating the Sensitivity of the Size Premium.
- Authors
Zweig, Derek; Sumner, Timothy; Luke, Adam
- Abstract
This article explores the sensitivity of the size premium in valuation modeling and discusses different sets of size premiums based on modeling assumptions. It addresses the theoretical and practical justifications for the size premium and critiques and alternative explanations. The article emphasizes the importance of robustness tests and provides insights into the calculation and implications of the size premium in valuation. The document discusses factors to consider when calculating size premiums, such as matching the pricing regime, distinguishing between events and regimes, and choosing the risk-free rate. It also highlights the importance of using appropriate market indices and methodologies for calculating beta and equity risk premium. The text mentions a study that found different size premiums for different deciles and suggests that further research is needed.
- Subjects
CAPITAL assets pricing model; REAL economy; RISK premiums; RANDOM walks; INTEREST rates; BUSINESS cycles; MICROECONOMICS; REDEMPTION (Law); CAPITAL requirements
- Publication
Value Examiner, 2024, p16
- ISSN
1094-3137
- Publication type
Article