Data Update 5: Relative Risk and Hurdle Rates

This article examines multiple approaches to measuring relative risk across companies (betas, standard deviation, high-low price ranges, and earnings variability) and demonstrates how to convert these risk measures into hurdle rates—specifically costs of equity, debt, and capital—for valuation purposes. The author provides empirical data on the distribution of these metrics across global regions and industries as of January 2020, emphasizing that DCF valuation does not require beta specifically and offering alternative risk measures for practitioners who distrust market-based approaches.