Editorial Type:
Article Category: Research Article
| Online Publication Date: 01 Jan 2006
Company-Specific Risk—A Different Paradigm: A New Benchmark
Company-Specific Risk—A Different Paradigm: A New Benchmark
ASA, CFA and
ASA, CFA
Page Range: 22 – 28
Even though, according to traditional financial theory, public markets do not price company-specific risk, it does not mean that it does not exist or is not quantifiable for public comparables. In all instances, the company-specific risk premium for publicly traded companies is greater than 0%—yet appraisers start their benchmark analysis at 0% to determine an appropriate company-specific risk premium for privately held companies. Is this a flaw in our collective thinking?Abstract
Copyright: © 2006 American Society of Appraisers
Contributor Notes
Peter Butler, ASA, CFA and Keith Pinkerton, ASA, CFA, work in the financial and valuation services division of Hooper Cornell, a full-service CPA firm in Boise, Idaho.