A paper titled "Best Practice for Cost-of-Capital Estimates" (Levi and Welch, 2017) focuses on … [Read more]
CAPM, Risk, and Return: Why the Relationship Is Broken
In an earlier post we illustrated the fundamental breakdown of the risk-vs-return relationship as … [Read more]
“The Value of Cash” Published in CFO.com
Building on the research summarized in an earlier post "The Value of Surplus Cash", we assembled the … [Read more]
The Value of Surplus Cash
Optimizing financing policy includes deciding how much liquidity a company should carry. In this … [Read more]
Corporate Finance Analysis: 10 Deadly Sins
We're all guilty of these, at different times and in different ways. The cause is usually laziness … [Read more]
Convertible Bond WACC
Though we're not fans of the CAPM definition of risk, the framework is widely known and serves as a … [Read more]
CAPM Is More Broken Than We Thought
Do you remember that feeling you got when you heard there wasn't a Santa Claus? How about when you … [Read more]
Share Repurchase and a Heterogeneous Investor Base
In a recent post, Felix Salmon suggests that Dell has done a disservice to its equity investors: A … [Read more]
Adjust Valuation Multiple for Growth
If one equity is valued at 15x P/E, and another at 10x P/E, is the latter a bargain? To answer this … [Read more]
Share Repurchase Literature Survey
This post is a quick survey of recent literature regarding share repurchases. We look at who … [Read more]
What Does a Share Buyback .. Buy?
Answer: nothing. If you invest in a private equity fund, the general partner is tasked with … [Read more]
Optimal Capital Structure with Business Disruption Costs
In an earlier post we showed that, for a tax-paying firm, WACC is always a declining function of … [Read more]
Use Distance-Based Peer Analysis
In an earlier post we saw how peer analysis can mislead. In this post we suggest a better method: … [Read more]
How To Mislead with Peer Analysis
Peer analysis can provide a cross check for the recommendations we derive from more normative … [Read more]
Share Repurchase Myths
There's a surprising amount of misleading writing about capital distribution, and in particular the … [Read more]
The Economic Irrelevance of Distribution Form
A recent article in the Economist suggests that managers with exposure to their firm's share price … [Read more]
The End of Dividends
Once the dominant form of capital return, regular dividends have been in secular decline since the … [Read more]
A Process for Quantitative Analysis
Though quantitative analysis is interesting in its own right, we expect its practice to become more … [Read more]
Consider Behavioral Finance
Behavioral finance is a great field, no doubt, and deserved its 2002 Nobel prize. The difficulty … [Read more]
Mislead with Regression Analysis
There are lies, damn lies, statistics, and regression analyses. In this post we'll examine some of … [Read more]