Considerations in Applying a Size Premium (Part III of III) In this third and final article, as displayed in Exhibits 1 through 4 in Part 1 of this three-part article, the size effect has been observed even when looking at recent periods starting in 1981 and 1990. If one holds that you should not apply the SP in the MCAPM and that beta should be the only measure of risk, one is supporting using the pure or textbook CAPM to estimate expected returns. But that cannot be correct as the literature clearly demonstrates. Though the pure CAPM is a good…
-
-
What risk assets are not near record valuations, aside from assets in a few sectors such as energy and retail? Investing when multiple expansion occurs over a holding period is a great thing, but multiples cannot expand forever; they also can contract. Jeff Davis, managing director of Mercer Capital’s Financial Institutions Group, explains. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Gravity Matters, Especially for Financial Investors. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.