anonymous
  • anonymous
Hi Is it right to add specific risk of the industry to the discount rate obtained by CAPM model? Is there any incosistency?
Finance
katieb
  • katieb
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anonymous
  • anonymous
No, that's incorrect. The discount rate calculated through CAPM should already reflect the industry risk of the company under analysis.
anonymous
  • anonymous
Hi there, I believe what you would be looking for is something similar to the Bond Yield plus return measure. This is a lot of work because it requires data accumulation for the entire industry and market behavior towards each valuation metric. Take a look at the Fama French version of CAPM that allows for premiums added on size and value.

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