Used in the Singer-Terhaar approach to estimate the illiquidity premium. Can someone please explain how this is calculated?
Not sure since they don’t give all the inputs (volatility or risk-free rate)… intuitively the illiquidity premium’s built into the 12% required return per ICAPM (i.e. beta-driven), so they’re just adding it back to make the illiquid portfolio at least as efficient as the GIM (i.e. illiquid portfolio risk-adjusted returns are at least as good as just holding the world market portfolio) and calling the add-back the illiquidity premium. Footnote says to read Staub/Niedermeier (2003) for more details… wonder how many candidates actually do the source readings??! Maybe 1 in 10,000?
Neveruse_95%_everagain Wrote: ------------------------------------------------------- > > Footnote says to read Staub/Niedermeier (2003) for > more details… wonder how many candidates > actually do the source readings??! Maybe 1 in > 10,000? hahah i did it once… then vowed never to do it again! I guess if they didn’t go into too much detail on the MPSR, we can’t expect too much on it. I’ll move on.
I hear you… can’t be more than a couple of points. Good luck