Why do local market risk premiums differ across national stock markets? Do the differences mean that some markets are more attractive to invest in than others?
Answer to relevant QuestionsAre there conditions under which you should consider using a local market risk premium and a local beta estimate for a valuation rather than a global risk premium and beta? Identify the value drivers embedded in a “real” option and how they might interact. Discuss the relative merits of including risk adjustments in cash flow or in discount rates—especially for high-growth companies in emerging markets—and show how both approaches can be aligned. Explain how the process of valuing a high-growth company differs from valuing an established company. What are the potential reasons cyclical companies invest cyclically rather than countercyclically?
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