The hottest Corporate Finance Substack posts right now

And their main takeaways
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Top Finance Topics

January 2016 Data Update 7: Dividends, Potential Dividends and Cash Balances

Musings on Markets • 0 implied HN points • 27 Jan 16
💰 Finance Investment Corporate Finance Dividends Market Analysis Economic Trends
  1. Dividends are an important part of investing, as they represent the cash that companies return to their shareholders. A company's ability to pay dividends often depends on its cash flow and investment opportunities.
  2. Many companies are now using stock buybacks, along with dividends, to return cash to shareholders. This trend has become popular globally, especially in the US.
  3. Companies' cash balances can show how dividend policies are affecting their financial health. Some companies might hold a lot of cash instead of paying dividends, which can lead to inefficiencies or missed opportunities.

January 2016 Data Update 6: Debt, the double edged sword!

Musings on Markets • 0 implied HN points • 25 Jan 16
💰 Finance Corporate Finance Debt Management Investment strategy Economic Trends Market Analysis
  1. Debt can be a double-edged sword for companies. It offers tax benefits and can encourage better project decisions, but it also increases the risk of default and conflicts with lenders.
  2. Different companies have various levels of debt based on their industry and region. Some sectors, like real estate and commodities, tend to have higher debt ratios, while tech companies often borrow less due to uncertainty.
  3. In good times, debt can boost company value, but in bad times, it can lead to financial trouble. It's important to carefully assess how much debt a company has before investing.

January 2016 Data Update 4: The Costs of Capital

Musings on Markets • 0 implied HN points • 14 Jan 16
💰 Finance Corporate Finance Valuation Investment Analysis Risk management Economic Indicators
  1. The cost of capital is crucial for businesses as it helps determine where to invest. Companies need to know the minimum returns needed to justify their investments.
  2. It plays a key role in deciding the mix of debt and equity a company should use. Understanding this mix can optimize financial performance.
  3. Different sectors have varying costs of capital due to risk factors. It's important to use a cost of capital that reflects the specific risks of investments being considered.

January 2016 Data Update 2: Interest Rates, Exchange Rates and Currencies

Musings on Markets • 0 implied HN points • 08 Jan 16
💰 Finance Interest Rates Corporate Finance Investment decisions Macroeconomics
  1. Interest rates and exchange rates are key players in finance because they affect investment returns and company earnings. Trying to predict changes in these rates can lead to mistakes.
  2. There is no one-size-fits-all risk-free rate; it varies by currency and country. To find a risk-free rate, you need to account for local factors like government bond rates and default risks.
  3. When dealing with different currencies, it's important to stay consistent in your valuations. This helps make sure that changes in inflation and risk are accounted for fairly across different currencies.

No Mas, No Mas! The Vale Chronicles (Continued)!

Musings on Markets • 0 implied HN points • 26 Sep 15
💰 Finance Investing Valuation Stock Market Corporate Finance
  1. Valuing companies in tough situations, like Vale, can give investors better returns if done right. Even when the market is uncertain, having a value estimate can still be useful.
  2. Political and country risks can have long-lasting effects on investments. Inconsistent political situations can make it harder to predict investment outcomes.
  3. The amount of debt a company holds can worsen its financial problems. High debt levels can limit a company's ability to recover from market downturns, making cautious investment essential.
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Storied Asset Sales: Valuing and Pricing "Trophy" Assets

Musings on Markets • 0 implied HN points • 15 Aug 15
💼 Business Asset Valuation Investment strategy Corporate Finance Market Analysis Mergers & Acquisitions
  1. Trophy assets are unique and rare, often gaining value from their scarcity, history, or recognition. This means they can be very desirable when they go up for sale.
  2. These assets usually generate cash flow, making them more like traditional investments rather than just collectibles. Their value can be assessed based on their potential earnings.
  3. When people label an asset as a trophy, it can suggest that buyers might be paying a premium due to emotional reasons, rather than just financial ones. Sometimes, this is justified if the asset offers future growth or synergies.

DCF Myth 2: A DCF is an exercise in modeling and number crunching!

Musings on Markets • 0 implied HN points • 08 Aug 15
💰 Finance Valuation Investing Corporate Finance Financial Analysis Market Dynamics
  1. Valuation is not just about numbers; it's about the story behind those numbers. A good valuation connects a company’s narrative to its financial data.
  2. In early-stage companies, the narrative drives value more than the numbers. As companies mature, the focus shifts to actual financial performance.
  3. Investors should look for significant changes in a company's narrative rather than just details like revenue or earnings per share. A strong story is essential for understanding a company's value.

Cash, Debt and PE Ratios: Cash is an upper and debt is a downer!

Musings on Markets • 0 implied HN points • 03 Jun 15
💰 Finance Investing Debt Management Stock Valuation Corporate Finance Market Analysis
  1. Cash balances can improve a company's price-to-earnings (PE) ratio, making it look more attractive. This is especially true when interest rates are low.
  2. On the other hand, having a lot of debt can lower the PE ratio, making a company seem riskier. So, companies with high debt might not be as appealing despite good earnings.
  3. It's important to consider both cash and debt when evaluating a company's financial health. Just looking at the PE ratio alone can be misleading.

The Value and Pricing of Cash: Why low interest rates & large cash balances skew PE ratios

Musings on Markets • 0 implied HN points • 27 May 15
💰 Finance Valuation Investing Market Analysis Cash Management Corporate Finance
  1. Cash is often misunderstood in company valuations. It should be simply valued without complex models, but many investors mishandle it.
  2. Low interest rates and high cash balances impact price-to-earnings (PE) ratios. When cash makes up a large part of a company's value, it can distort their financial ratios.
  3. We need to separate cash from operational value when evaluating companies. This helps create a clearer picture of their actual performance and worth.

Dealing with Low Interest rates: Investing and Corporate Finance Lessons

Musings on Markets • 0 implied HN points • 03 Apr 15
💰 Finance Investing Economics Corporate Finance Interest Rates Central Banks
  1. Low interest rates are a global issue, and they can create confusion for investors and businesses. It's important to understand that these rates are affected by factors like inflation and economic growth, not just central bank policies.
  2. Central banks do influence interest rates, but they don't completely control them. Instead, real fundamentals of the economy play a much bigger role, so investors should focus on those instead of solely following central bank actions.
  3. When dealing with low interest rates, investors should adapt their strategies. Instead of longing for 'normal' interest rates from the past, they need to base their decisions on the current market conditions and remain flexible with their assumptions.

The X Factor in Value: Excess Returns in Theory and Practice

Musings on Markets • 0 implied HN points • 19 Jan 15
💼 Business Finance Investing Corporate Finance Returns Market Analysis
  1. Businesses aim to make more money than they would elsewhere, but achieving excess returns can be hard due to competition and other challenges.
  2. To see if a company is making excess returns, you need to compare the expected return on investment against the actual returns, which can be tricky due to factors like accounting variability.
  3. Many companies don't achieve excess returns, suggesting that competition is tough and some managers might not realize their businesses aren't making enough profit.

Putting the D in the DCF: The Cost of Capital

Musings on Markets • 0 implied HN points • 19 Jan 15
💰 Finance Investment Corporate Finance Valuation Risk management Financial Analysis
  1. The cost of capital is really important in finance and there are three main ways to understand it: as a cost of raising money, as an opportunity cost, and as a discount rate for valuing businesses.
  2. When figuring out a company's cost of capital, you need to look at the risk of the business, the debt it has, and how much investors expect to earn. It’s a detailed process but crucial for making good financial decisions.
  3. It's easy to get caught up in small details about the cost of capital, but what's more important is to focus on the actual cash flows of the business. Getting those numbers right can make a bigger impact.

The Tax Story in 2015: Myths, Misconceptions and Reality Checks

Musings on Markets • 0 implied HN points • 19 Jan 15
💰 Finance Taxation Corporate Finance Economic Policy Data Analysis
  1. Many people think they pay their fair share of taxes while believing that others don't. It helps to look at real data to see how taxes are actually paid.
  2. Even though the U.S. has a high corporate tax rate, companies in the U.S. pay a significant portion of their income in taxes, similar to or higher than companies in other countries.
  3. There's talk of changing the corporate tax code in the U.S. to make it simpler and fairer. Suggestions include lowering the tax rate and only taxing foreign income at local rates.

Stock Buybacks: They are big, they are back and they scare some people!

Musings on Markets • 0 implied HN points • 22 Sep 14
💰 Finance Stocks Investments Corporate Finance Market Trends Valuation
  1. Stock buybacks have become popular again and can be a way for companies to return cash to their shareholders. It's important to understand how buybacks impact both the company's stock value and the shareholders.
  2. Buybacks can either help or hurt a company's value depending on how they're funded and their effect on investments. If a company uses cash wisely, buybacks can be beneficial; but if they lead to increased debt or poor investments, they can be harmful.
  3. There's a lot of debate about whether buybacks are good or bad for the economy. Critics worry they lead to less investment in businesses, but some argue returning cash this way can actually be a smart move when companies don't have good opportunities for reinvestment.

Reacting to Earnings Reports: Let's get real!

Musings on Markets • 0 implied HN points • 08 Aug 14
💰 Finance Investing Market Analysis Earnings Reports Stock Valuation Corporate Finance
  1. Earnings reports can change how people see a company's value and affect its stock price. If a company beats or misses estimates, it can lead to big reactions in the market.
  2. Apple appears to be a mature company with slow growth and declining margins. Despite meeting estimates, its stock often drops after earnings reports, reflecting a stable but unimpressive narrative.
  3. Facebook has been growing rapidly, particularly in mobile advertising, which has shifted its market narrative positively. This might lead Facebook to potentially surpass Google in online advertising in the future.

Reacting to Earnings Reports: Pricing Metrics and Market Reactions

Musings on Markets • 0 implied HN points • 06 Aug 14
💰 Finance Investing Market Analysis Earnings Reports Valuation Corporate Finance
  1. Investors often focus on one or two key metrics, like earnings per share, because it's simpler than developing a full understanding of a company's value. This can be risky as it can lead to ignoring other important factors.
  2. Different stages of a company's growth can change which metrics investors pay attention to. Early on, they might care more about user numbers, while mature companies might shift focus to earnings and profitability.
  3. Relying too much on specific metrics can lead to problems, like missing the bigger picture or companies manipulating numbers to look better. It's important for investors to keep an eye on the whole situation, not just one number.

Yahoo! A puzzle, a mystery and an enigma

Musings on Markets • 0 implied HN points • 11 May 14
💼 Business Valuation Investing Equity Market Analysis Corporate Finance
  1. Yahoo is really hard to value because it has parts of other companies, like Alibaba and Yahoo Japan, that aren't shown clearly in its financial numbers. This makes it tough for investors to see the real worth of Yahoo.
  2. Yahoo has been declining in the U.S. while Yahoo Japan is doing well in Japan. This contrast raises questions about why Yahoo hasn't been able to replicate that success domestically.
  3. There are a lot of uncertainties around Yahoo's future, especially concerning how it will manage its investments in Alibaba. Investors are waiting to see if they will sell shares after Alibaba's IPO and what the resulting tax implications will be.

Facebook buys Whatsapp for $19 billion: Value and Pricing Perspectives

Musings on Markets • 0 implied HN points • 20 Feb 14
💰 Finance Investing Valuation Market Analysis Corporate Finance Mergers & Acquisitions
  1. There are two main ways to look at investments: as traders who focus on prices or as investors who focus on value based on fundamentals. Both sides have their strengths, but it's important to understand their differences.
  2. For Facebook's purchase of WhatsApp, focusing on user numbers and engagement is crucial for traders, as these factors heavily influence pricing and market value.
  3. It's risky for both investors and traders to assume that their perspective will control the market, as trends can shift from user numbers to profits unexpectedly.

Numbers Time! Data update for 2014

Musings on Markets • 0 implied HN points • 09 Jan 14
💰 Finance Data Analysis Investment Strategies Corporate Finance Global Markets Valuation Techniques
  1. Data access has changed a lot over the years. In the past, it was hard to find data unless you were at a university or bank, but now it's way easier and more global.
  2. The reason for sharing this data is partly self-interest. It helps the creator make better investment decisions and save time throughout the year.
  3. When using this data, remember that it reflects personal judgments and can include errors. It's important to verify details and be cautious when making decisions based on the numbers.

Chill, dude (Part II): Debt Default Drama Queens

Musings on Markets • 0 implied HN points • 16 Oct 13
💰 Finance Investing Market risk Debt Management Economic Trends Corporate Finance
  1. Governments can default on their debt, even in developed markets like the US. People used to think that US Treasury bonds were completely safe, but that belief has changed over time.
  2. The risk of government default is not a black-and-white situation; it can vary. There is an ongoing perception in the market that there's some default risk associated with US government bonds now.
  3. If default risk rises, it affects the overall market. Investors might demand higher returns for risky investments, making stocks and corporate bonds less attractive and potentially lowering their values.

When the pieces add up to too much: Micro Dreams and Macro Delusions

Musings on Markets • 0 implied HN points • 15 Oct 13
💰 Finance Market Analysis Investment strategy Valuation Methods Corporate Finance Economic Trends
  1. Social media companies might be overvalued as a whole. While individual companies can have solid growth, the total market might not support such high valuations.
  2. There will be a few winners among these companies in the future. Investors should focus on identifying which companies will succeed, as some can thrive even in a crowded market.
  3. Easy entry into the market can lead to higher growth but also lower profits. This means that just because a market is growing doesn't mean companies will make big money.

Many a slip between the cup & the lip: From forward value to value per share today

Musings on Markets • 0 implied HN points • 11 Sep 13
💰 Finance Investing Valuation Market Analysis Risk management Corporate Finance
  1. Valuing young growth companies is tough but important. It helps you understand what the business needs to succeed.
  2. Per share values can be tricky with young companies because the number of shares can change a lot. Always be cautious when looking at these numbers.
  3. Using future earnings to estimate a company's value can be misleading. It often doesn't show the risks like potential failures or dilution from new shares.

Apple: News, Noise and Value

Musings on Markets • 0 implied HN points • 30 Apr 13
💰 Finance Investing Valuation Earnings Market Trends Corporate Finance
  1. Apple's earnings reports create a lot of buzz, making it tricky for investors to sort out valuable information from all the hype. It's important to focus on the company's fundamentals rather than get caught up in the noise.
  2. The company's financial position shows cash is strong, but they face challenges with revenue growth and shrinking margins. The decision to return cash to shareholders through buybacks and dividends is seen as a positive move.
  3. There are concerns about Apple's future growth and competition in the smartphone market, but if you're already holding the stock, it might still be worth keeping due to its strong cash flow and potential for new products.

Hundred dollar bills are hard to come by!

Musings on Markets • 0 implied HN points • 13 Feb 13
💰 Finance Investing Market Analysis Economic Theory Corporate Finance
  1. Finding a $100 bill on the street is rare, similar to finding big opportunities in highly followed stocks. You might have better luck in wealthy areas compared to busy streets.
  2. Searching for 'free' money can be a waste of time, as the effort may not be worth it. Just like checking for coins at a phone booth, it might not yield enough results.
  3. It's important not to rely on luck for financial planning. Expecting to find money frequently is unwise and could lead to budget problems.

Financial Alchemy: David Einhorn’s “value” play for Apple

Musings on Markets • 0 implied HN points • 08 Feb 13
💰 Finance Investing Stock Market Corporate Finance Value investing Financial Analysis
  1. Giving preferred stock to Apple shareholders won't really create any new value for the company since it doesn't change cash flows or risk. It's like trying to make something out of nothing.
  2. Issuing preferred stock might affect the stock price, but there are simpler ways for Apple to reassure investors about its cash, like increasing common dividends or doing stock buybacks.
  3. Many companies confuse price and value, which leads to misleading claims. It's important to be clear about whether an action will actually increase value or just the stock price.

It's time: A new semester begins.. and you are welcome to join in...

Musings on Markets • 0 implied HN points • 01 Feb 13
🚌 Education Online Learning Corporate Finance Valuation Student Engagement
  1. The new semester for corporate finance and valuation classes starts soon, and everyone is welcome to join, either live or through recorded sessions.
  2. Participants can choose from various platforms like a personal website, Lore, iTunes U, and Symmynd to access course materials and lectures.
  3. To help with the busy lives of students, the classes will have flexible content availability, shorter lecture versions, and online quizzes to keep learners engaged and assess their understanding.

Data Update 2013: The Dark Side of Numbers

Musings on Markets • 0 implied HN points • 13 Jan 13
💰 Finance Data Analysis Corporate Finance Investment Strategies Risk Assessment Economic Indicators
  1. Some people use complex numbers to scare others into agreeing with them. You can fight this by sticking to common sense and focusing on the main idea.
  2. Data can be twisted to support a certain viewpoint by only showing what fits. Always check for the full picture before believing claims.
  3. Many analysts hide behind data instead of making tough decisions. It's better to personalize and adapt data to your own understanding rather than rely on generic numbers.

The year in review: Apple's universe?

Musings on Markets • 0 implied HN points • 28 Dec 12
💼 Business Corporate Finance Investment strategy Market Analysis Stock Performance Consumer Technology
  1. Apple had an exciting year in 2012, becoming a major focus in both finance and culture. Their products and earnings announcements attracted a lot of attention, almost like celebrity news.
  2. Debates about how Apple should manage its enormous cash reserves heated up, leading to decisions around dividends and stock buybacks. Ultimately, Apple returned cash to shareholders but less than some expected.
  3. Investors in Apple need to watch for changes in stock price and understand that different groups of shareholders may have conflicting expectations. It's important to focus on Apple's overall value, rather than get distracted by small details.

Acquisition Alchemy: Creating value from deals

Musings on Markets • 0 implied HN points • 19 Dec 12
💼 Business Mergers Acquisitions Valuation Strategy Corporate Finance
  1. Acquiring smaller companies tends to lead to better success than merging with larger ones. Smaller targets usually come with less integration issues.
  2. It's important to assess the true value of a target company before making an offer. Paying too much can ruin a good acquisition, so understanding what you're paying for is key.
  3. Having a solid plan for after the acquisition is crucial. Integration needs resources and clear strategies for success, or the deal may not work out.

Acquisition Accounting II: Goodwill, more plug than asset

Musings on Markets • 0 implied HN points • 17 Dec 12
💰 Finance Accounting Valuation Investments Mergers Corporate Finance
  1. Goodwill on balance sheets can confuse investors because it doesn't really represent an actual asset. It basically acts as a placeholder that can mix a lot of different values together.
  2. Changes in accounting rules made it harder to compare companies that do acquisitions with those that grow internally. This makes it tricky for investors to understand a company's real value.
  3. Impairments of goodwill can impact stock prices, but they also create more confusion in financial reports. This could mean that investors are often surprised by these impairments long after the acquisition.

The disclosure dilemma: Why more disclosure has led to less information

Musings on Markets • 0 implied HN points • 15 Oct 12
💰 Finance Investing Accounting Regulation Corporate Finance Market Trends
  1. Increasing disclosure often leads to overwhelming data that makes it harder for investors to find valuable information. More pages in financial reports can cause confusion rather than clarity.
  2. Not all details in long reports are important; focusing on major aspects can save time. Investors should ignore minor issues that don’t significantly impact big companies.
  3. Simplifying disclosures and targeting them to investors instead of lawyers could improve understanding. Companies might benefit from presenting two types of reports: one for legal eyes and one for investor insights.

Greg Smith on Goldman: An indictment of investment banking?

Musings on Markets • 0 implied HN points • 19 Mar 12
💰 Finance Investment Banking Corporate Finance Client Relations Market Trends
  1. Investment banks often prioritize their own interests over those of their clients. This creates a relationship where both sides can be exploitative.
  2. The focus on deal-making and specialization in finance can lead to a lack of understanding about the broader impacts of decisions. Narrow expertise often overshadows the need for a bigger picture perspective.
  3. For investment banks to be more client-focused, they should hire generalists, tie compensation to long-term relationships, and be more selective about their clients.

Apple: Thoughts on bias, value, excess cash and dividends

Musings on Markets • 0 implied HN points • 02 Mar 12
💰 Finance Investing Stocks Dividends Market Analysis Corporate Finance
  1. Apple has a huge cash reserve, but it's not necessarily hurting shareholders. The cash can earn low returns, but many investors find it neutral and feel safe with Apple's management.
  2. There are concerns about how Apple uses its cash. With the fear of poor investments, some options like buying companies are being looked at skeptically, while returning cash to shareholders could be a better move.
  3. Apple's best step might be to buy back some of its shares. This would show confidence in its value and manage its cash well, while continuing to focus on creating innovative products.

The IPO of the decade? My valuation of Facebook

Musings on Markets • 0 implied HN points • 16 Feb 12
💰 Finance Investing Valuation Equities Market Analysis Corporate Finance
  1. Facebook's growth has been huge, with revenues doubling every year for a while. The company seems to have a solid plan to continue growing, but there are questions about how long that can last.
  2. Operating profits for Facebook are impressive, but they might drop as the company tries to grow even more. Still, expectations are high for Facebook's financial performance compared to other companies like Google.
  3. Investing in Facebook comes with risks. While it has a lot of potential, the company is not set up to give shareholders much say in how it operates, which could be a red flag for some investors.

Options and Taxes: Is a "Facebook" tax next?

Musings on Markets • 0 implied HN points • 04 Feb 12
💰 Finance Taxation Corporate Finance Options trading Valuation Policy Analysis
  1. Mark Zuckerberg's large option exercise will lead to a huge tax bill for him, while Facebook benefits from a big tax deduction. This raises questions about how stock options are taxed.
  2. There's a disconnect between accounting and tax rules regarding options, leading to successful companies like Facebook getting bigger tax breaks than less successful ones like Cisco.
  3. Policymakers might consider changing tax laws to align with accounting rules, but that could create complexities for employees dealing with tax on unrealized options.

Moneyball and Investing: Data, Information and my 2012 Update

Musings on Markets • 0 implied HN points • 26 Jan 12
💰 Finance Investing Data Analysis Market Trends Financial forecasting Corporate Finance
  1. Investing should focus more on data and numbers rather than just gut feelings or stories from analysts. Just like in baseball, using hard data can lead to better investment choices.
  2. Data is useful, but it’s important to understand that all numbers are estimates. This means they can have errors and should be used carefully.
  3. To make good investment decisions, combine data analysis with sensible stories. Numbers are a starting point, but having a narrative helps make better choices.

Buffett and Bank of America: Playing Poker with Patsies...

Musings on Markets • 0 implied HN points • 26 Aug 11
💰 Finance Investing Banking Market Analysis Corporate Finance Financial Strategy
  1. Warren Buffett's investment in Bank of America might seem helpful, but it actually comes with terms that could hurt the bank's stockholders. Buffett gets great benefits while the bank may take on extra burdens.
  2. Buffett's deal included a hefty dividend and options to buy shares at a low price, which could lead to big profits for him. However, Bank of America still risks losing control over its dividends and stock buybacks.
  3. While some people see Buffett’s involvement as a sign the bank is doing well, the deal's terms suggest the opposite. It raises questions about whether Bank of America is truly stable or hiding bigger financial problems.

Trapped Cash: Measurement and Consequences

Musings on Markets • 0 implied HN points • 19 Aug 11
💼 Business Corporate Finance Investment strategy Market Analysis Global Economics
  1. Trapped cash is money that companies can't easily access because it's stuck in foreign subsidiaries. This happens for several reasons like local laws, taxes, and investment needs.
  2. Having trapped cash can hurt a company's value. If that cash isn't earning a good return or is hard to access, it could lead to wasted resources or bad investment decisions.
  3. Changing tax laws could help release trapped cash, but many believe these changes won't boost investments or create jobs. Instead, companies might just use the cash for dividends or buybacks instead.

Alternatives to the CAPM: Part 3: Connecting cost of debt to cost of equity

Musings on Markets • 0 implied HN points • 30 Apr 11
💰 Finance Capital Markets Investment Theory Risk management Corporate Finance Investment Risk management Capital Markets Financial Analysis Corporate Finance
  1. It's easier to figure out the cost of debt because you can see the interest rate when borrowing. This makes it a more straightforward number to use when looking at a company's finances.
  2. You can estimate the cost of equity by comparing it to the cost of debt and factoring in the volatility of both stocks and bonds. If the cost of debt is 8%, the cost of equity might be higher, like 12%, if stocks are riskier.
  3. This method works best for big companies with significant debt. However, it has limits because equity risk and bond risk are different, so care is needed in using this approach.

Alternatives to the CAPM: Part 1: Relative Risk Measures

Musings on Markets • 0 implied HN points • 28 Apr 11
💰 Finance Investment Risk management Asset Pricing Market Analysis Corporate Finance Asset Pricing Investment Theory Risk management Corporate Finance Market Analysis
  1. The CAPM model has flaws and many people have shifted to using better methods for measuring risk and estimating returns. It's criticized for being too simple and for its dependence on past market prices.
  2. Multi Beta Models and Market Price based Models offer alternatives to CAPM by considering multiple factors or standard deviations instead of relying on a single market beta. These models are intended to improve return estimates but have their own complexities.
  3. Accounting information based models use a company's financial health as a measure of risk. They connect risk to fundamental business factors but can be misleading due to the way accounting numbers are reported.