A General Risk Framework

According to academia, the cost of equity can be calculated using the CAPM, a central model to modern financial theory. But even Damodaran critizes this as a statistical approach usually considered too narrowly. Damodaran tends to and recommends to think about business risk in a more general sense first, without applying sophisticated and data-heavy statistical methods (which might have its place).

According to Damodaran, a firms risk (unlevered beta) is dependent on the variability of the (i) top line and its (ii) profit margins …

Read About a General Risk Framework (the full article) at my new micro-page.

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