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An equity risk premium for business valuation of Dutch companies

Berkel, R.A. (2021) An equity risk premium for business valuation of Dutch companies.

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Abstract:The equity risk premium (ERP) is one of the most important, but elusive parameters in finance. Although many academics and practitioners estimate the premium, there is a lack of consensus about its value. We attribute this lack of consensus to the ERP design, which includes the approach, the input parameters, and the market proxy used to estimate the premium. We set out to design an ERP for the Dutch market so that corporate finance firms appraising businesses active in this market can improve the quality of their valuations and inherently the services they provide. The contribution of the research is threefold: 1. The research contributes to the body of knowledge by giving a general overview of the ERP and providing insight into its estimation process by establishing the possible options and identifying the most appropriate choice for each step of the process. 2. The research contributes to the understanding of ERP estimation in practice by offering a high level of transparency in the estimation through the ERP tool. 3. The research contributes to existing applications of the ERP in practice as the tool offers advantages such as the ability to estimate the premium daily.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics
Programme:Industrial Engineering and Management MSc (60029)
Link to this item:http://purl.utwente.nl/essays/85929
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