Can someone please help me build up a list of different build up methods and their uses? I’ll start 'er off… Fama-French - Multifactor used to find required rate of return for a stock Inputs: risk free rate, small cap premium, market risk premium, and value return premium Pastor-Stambaugh Model: Multifactor with same purpose as FF Inputs: Same as FF, adding a liquidity risk premium I’m just trying to figure out how many there are exactly, please contribute!
Bond Yield Plus Risk Premium Method - Uses YTM on traded debt and a premium for equity Inputs: Yield on the LONG TERM Debt of the company, a Risk Premium Burmeister, Roll & Ross Model uses macroeconomic variables believed to affect cash flows Inputs: Confidence risk, Time horizon risk, Inflation risk, Business cycle risk, Market timing risk and sensitivity coefficients for each of the risks (i.e., Beta) IN GENERAL ================ For an approach- the Betas tell us about the characteristics of the asset and the Risk Premia imply the how those characteristics are priced in the market