Some Varied Views on Risk On the Proper Adjustment for Risk Through Discount Rates in a Mean-Variance Framework Introduction

In spite of some well known shortcomings [2], riskadjusted discount rates continue to occupy a prominent position, and in practice they are often viewed as a reasonable compromise between theoretical validity and operational simplicity [1]. Given perfect capital markets, and assuming the capital ass...

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Bibliographic Details
Published inFinancial management Vol. 8; no. 2; p. 62
Main Authors Everett, James E, Schwab, Bernhard
Format Journal Article
LanguageEnglish
Published Tampa Financial Management Association International 01.07.1979
Subjects
Approximation
Capital assets
Cash flow forecasting
Discount rates
Expected values
Present value
Risk premiums
Standard deviation
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Summary:In spite of some well known shortcomings [2], riskadjusted discount rates continue to occupy a prominent position, and in practice they are often viewed as a reasonable compromise between theoretical validity and operational simplicity [1]. Given perfect capital markets, and assuming the capital asset pricing model to be valid, relations which should prevail between risk and return have been rigorously derived.
ISSN:0046-3892
1755-053X