aswathdamodaran.blogspot.com · 2022-02-08
· 1577d
Data Update 4 for 2022: Risk = Danger + Opportunity
This comprehensive analysis examines how risk should be conceptualized, measured, and incorporated into corporate finance decisions, arguing that risk represents uncertainty about outcomes rather than expected bad outcomes. The article breaks down risk components across business, geographic, and financial dimensions, provides frameworks for calculating cost of capital, and critiques common delusions in how companies and investors set hurdle rates.
Metrics in this report
Cost of Capital (Global Median)
6.33percent
median
Global companies as of start of 2022, in US$ terms
Cost of Capital (US Median)
5.77percent
median
US companies as of start of 2022, in US$ terms
Country Risk Premium (India)
2.18percent
India as of start of 2022
Default Spread (Baa3 Rating)
1.87percent
Starting 2022; example for India sovereign rating
Equity Risk Premium (India)
6.42percent
India as of start of 2022
Implied Equity Risk Premium (US)
4.24percent
US market as of start of 2022
Relative Volatility (Emerging Market Equity to Bonds)
1.16ratio
S&P emerging market data used to scale default spreads