{"product_id":"the-risk-premium-factor-website-isbn-9781118099056","title":"The Risk Premium Factor, + Website","description":"\u003cb\u003eA radical, definitive explanation of the link between loss aversion theory, the equity risk premium and stock price, and how to profit from it\u003c\/b\u003e  \u003cp\u003e\u003ci\u003eThe Risk Premium Factor\u003c\/i\u003e presents and proves a radical new theory that explains the stock market, offering a quantitative explanation for all the booms, busts, bubbles, and multiple expansions and contractions of the market we have experienced over the past half-century.\u003c\/p\u003e \u003cp\u003eWritten by Stephen D. Hassett, a corporate development executive, author and specialist in value management, mergers and acquisitions, new venture strategy, development, and execution for high technology, SaaS, web, and mobile businesses, the book convincingly demonstrates that the equity risk premium is proportional to long-term Treasury yields, establishing a connection to loss aversion theory.\u003c\/p\u003e \u003cul\u003e \u003cli\u003eExplains stock prices from 1960 through the present including the 2008\/09 \"market meltdown\"\u003c\/li\u003e \u003cli\u003eShows how the S\u0026amp;P 500 has consistently reverted to values predicted by the model\u003c\/li\u003e \u003cli\u003eSolves the equity premium puzzle by showing that it is consistent with findings on loss aversion\u003c\/li\u003e \u003cli\u003eDemonstrates that three factors drive valuation and stock price: earnings, long term growth, and interest rates\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eUnderstanding the stock market is simple. By grasping the simplicity, business leaders, corporate decision makers, private equity, venture capital, professional, and individual investors will fully understand the system under which they operate, and find themselves empowered to make better decisions managing their businesses and investment portfolios.\u003c\/p\u003e  List of Figures xi  \u003cp\u003eList of Tables xiii\u003c\/p\u003e \u003cp\u003ePreface xv\u003c\/p\u003e \u003cp\u003eEvolution of a Theory xvi\u003c\/p\u003e \u003cp\u003eOverview xvii\u003c\/p\u003e \u003cp\u003eHow This Book Is Structured xxi\u003c\/p\u003e \u003cp\u003eAs You Begin xxii\u003c\/p\u003e \u003cp\u003eAcknowledgments xxiii\u003c\/p\u003e \u003cp\u003eAbout the Author xxv\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 1 Understanding the Simplicity of Valuation 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRates, Compounding and Time Value 3\u003c\/p\u003e \u003cp\u003eWhy Time Value Matters for the Stock Market 3\u003c\/p\u003e \u003cp\u003eValuing a Perpetuity 4\u003c\/p\u003e \u003cp\u003eConstant Growth Equation: The Key to Understanding the Stock Market 5\u003c\/p\u003e \u003cp\u003eNot the First to Try This 6\u003c\/p\u003e \u003cp\u003eWhy Growth Rate and Cost of Capital Matter 9\u003c\/p\u003e \u003cp\u003eP\/E Ratio Expansion and Contraction 10\u003c\/p\u003e \u003cp\u003eCAPM, Risk Premium and Valuation 11\u003c\/p\u003e \u003cp\u003eEquity Risk Premium 11\u003c\/p\u003e \u003cp\u003eImpact of Risk Premium on Valuation 13\u003c\/p\u003e \u003cp\u003eChapter Recap 14\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePART ONE Exploring the Risk Premium Factor Valuation Model\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 2 The Risk Premium Factor Valuation Model 18\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe RPF Model is Simple, but Does it Work? 21\u003c\/p\u003e \u003cp\u003eEstimating the Risk Premium Factor (RPF) 24\u003c\/p\u003e \u003cp\u003ePotential Causes for Shifts in the RPF 27\u003c\/p\u003e \u003cp\u003ePotential Weaknesses in RPF Theory and Methodology 28\u003c\/p\u003e \u003cp\u003eAdjusted Risk Free Rate 29\u003c\/p\u003e \u003cp\u003eComparison to the Fed Model 29\u003c\/p\u003e \u003cp\u003eChapter Recap 31\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 3 Solving the Equity Premium Puzzle: The Link to Loss Aversion 33\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eLoss Aversion 34\u003c\/p\u003e \u003cp\u003eLoss Aversion and Corporate Decision Making 34\u003c\/p\u003e \u003cp\u003eAttempts to Solve the Equity Premium Puzzle 35\u003c\/p\u003e \u003cp\u003eImpact of Inflation on Value 39\u003c\/p\u003e \u003cp\u003eBack to Loss Aversion 39\u003c\/p\u003e \u003cp\u003eOur Reptilian Brain 40\u003c\/p\u003e \u003cp\u003eChapter Recap 42\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 4 The RPF Model and Major Market Events from 1981 to 2009 43\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eEfficient Market Hypothesis 44\u003c\/p\u003e \u003cp\u003eHow the RPF Valuation Model Explains Black Monday 45\u003c\/p\u003e \u003cp\u003e2000 \"Dot Com\" Bubble: RPF Model Suggests Significant Bubble for the S\u0026amp;P 500 47\u003c\/p\u003e \u003cp\u003eHow the RPF Valuation Model Explains 2008-2009 Meltdown and Recovery 49\u003c\/p\u003e \u003cp\u003eMarkets Mostly Efficient and Rational, But Prone to Mistakes 52\u003c\/p\u003e \u003cp\u003eChapter Recap 53\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePART TWO Applying the Risk Premium Factor Valuation Model\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 5 Application to Market Valuation 57\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eBeware of Interest Rates 58\u003c\/p\u003e \u003cp\u003eExample: Application to the Market in Late September 2009 59\u003c\/p\u003e \u003cp\u003eWhy the Source of Growth Matters 61\u003c\/p\u003e \u003cp\u003eChapter Recap 63\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 6 Risk Adjusted Real Implied Growth Rate (RIGR) 65\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAnalyzing Individual Companies with RIGR 66\u003c\/p\u003e \u003cp\u003eRIGR Analysis of Apple and Google Pre-Earnings Announcement 71\u003c\/p\u003e \u003cp\u003eChapter Recap 75\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 7 Valuing an Acquisition or Project 77\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eBrief Introduction to Valuing an Acquisition or Project 78\u003c\/p\u003e \u003cp\u003eTranslating Your World View into Numbers 79\u003c\/p\u003e \u003cp\u003eSetting the Cost of Capital 84\u003c\/p\u003e \u003cp\u003eExample: Utility Acquiring a Risky Asset 86\u003c\/p\u003e \u003cp\u003eSelecting the Investment Forecast Time Horizon 87\u003c\/p\u003e \u003cp\u003eThe All Important Terminal Value 89\u003c\/p\u003e \u003cp\u003eChapter Recap 96\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 8 Case Study 1: Valuation of a High-Growth Business 99\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCalculating Enterprise Value and Stock Price 107\u003c\/p\u003e \u003cp\u003eScenario Analysis 107\u003c\/p\u003e \u003cp\u003eChapter Recap 108\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 9 Case Study 2: Valuation of a Cyclical Business 109\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eChapter Recap 118\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 10 Using the RPF Model to Translate Punditry 119\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRead Carefully Then Analyze 119\u003c\/p\u003e \u003cp\u003eWhat Have I Got to Lose? 120\u003c\/p\u003e \u003cp\u003eBeware of Oversimplification 122\u003c\/p\u003e \u003cp\u003eConfusing Headlines and Misguided Blame 123\u003c\/p\u003e \u003cp\u003eAlmost Nailed It 124\u003c\/p\u003e \u003cp\u003eGraham and Dodd 125\u003c\/p\u003e \u003cp\u003eThe Wrong Discussion 127\u003c\/p\u003e \u003cp\u003eDumb Money and Bubbles 127\u003c\/p\u003e \u003cp\u003eThe Right Discussion 128\u003c\/p\u003e \u003cp\u003eChapter Recap 129\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 11 Using the RPF Model for Investment and Business Strategy 131\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eEstimating Fair Value: How to Identify and Exploit Bubbles 132\u003c\/p\u003e \u003cp\u003eBeware of RPF Shifts 137\u003c\/p\u003e \u003cp\u003eInvesting in Individual Companies 137\u003c\/p\u003e \u003cp\u003eReported Earnings Can Be Misleading 138\u003c\/p\u003e \u003cp\u003eHow to Apply the RPF Model to Day-to-Day Business Decisions 140\u003c\/p\u003e \u003cp\u003eCapital Structure and Risk Impact Cost of Capital 141\u003c\/p\u003e \u003cp\u003eOpportunistic Adjustments to Corporate Capital Structure 141\u003c\/p\u003e \u003cp\u003eCreating a Sense of Urgency 142\u003c\/p\u003e \u003cp\u003eAvoiding Value Destruction 143\u003c\/p\u003e \u003cp\u003eValue Creation 145\u003c\/p\u003e \u003cp\u003eKey Merger-and-Acquisition Valuation Concepts 147\u003c\/p\u003e \u003cp\u003eInflation Is the Enemy of Value 147\u003c\/p\u003e \u003cp\u003eFinal Thoughts 147\u003c\/p\u003e \u003cp\u003eAppendix A Mobile Apps: The Wave of the Past 149\u003c\/p\u003e \u003cp\u003eAppendix B Technology on the Horizon: What if Moore's Law Continues for Another 40 Years? 152\u003c\/p\u003e \u003cp\u003eAppendix C A Simple and Powerful Model Suggests the S\u0026amp;P 500 Is Greatly Underpriced 156\u003c\/p\u003e \u003cp\u003eAppendix D S\u0026amp;P Index Still Undervalued 160\u003c\/p\u003e \u003cp\u003eAppendix E 30 Percent Value Gap in S\u0026amp;P 500 Closed by Rise in Treasury Yields, Price 163\u003c\/p\u003e \u003cp\u003eAppendix F Making a Case for Salesforce.com Valuation 165\u003c\/p\u003e \u003cp\u003eGlossary 169\u003c\/p\u003e \u003cp\u003eNotes 171\u003c\/p\u003e \u003cp\u003eAbout the Companion Website 177\u003c\/p\u003e \u003cp\u003eIndex 179\u003c\/p\u003e   \u003cp\u003e\u003cb\u003eSTEPHEN D. HASSETT\u003c\/b\u003e is a corporate development executive with Sage North America, a subsidiary of The Sage Group plc, a leading global supplier of business management software and services. He has published in the \u003ci\u003eJournal of Applied Corporate Finance\u003c\/i\u003e and is a regular contributing author for the Seeking Alpha investment website. Previously, he was an executive at the Weather Channel, software entrepreneur and consultant with Stern Stewart \u0026amp; Co. He holds an MBA from the Darden School of Business at the University of Virginia.     \u003c\/p\u003e\u003cp\u003e\u003cb\u003eTHE RISK PREMIUM FACTOR\u003c\/b\u003e  \u003c\/p\u003e\u003cp\u003eKnowing what to look for in the stock market can give you a competitive edge, but understanding the system itself—right down to the booms, busts, and bubbles of the past half-century— changes everything.  \u003c\/p\u003e\u003cp\u003eIn \u003ci\u003eThe Risk Premium Factor: A New Model for Understanding the Volatile Forces That Drive Stock Prices,\u003c\/i\u003e Stephen D. Hassett presents a radical new theory—the \"factor\" that explains the entire stock market, providing a definitive link between loss aversion theory, the equity risk premium, and stock price, and shows how you can make the most of the connection.  \u003c\/p\u003e\u003cp\u003eWhere others have tried and failed to find a link between loss aversion and the processes that control how investors set prices in the stock market, \u003ci\u003eThe Risk Premium Factor\u003c\/i\u003e succeeds. Demonstrating that the equity risk premium is proportional to long-term Treasury yields, the book establishes for the first time a quantitative connection between loss aversion and equity risk premium.  \u003c\/p\u003e\u003cp\u003eThis remarkable new concept can be used to explain stock prices from 1960 through to the present day, including the 2008 financial meltdown, not through theories and simulations, but with historical data that bear out the truth. It shows how the S\u0026amp;P 500 has consistently reverted to predicted values and solves the equity premium puzzle by showing that it is consistent with findings on loss aversion. Putting you back in the driver's seat when it comes to investing, the book clearly demonstrates the stock market's reptilian-like response to three factors drive valuation and stock price: earnings, long-term growth, and interest rates. This book also includes a companion website with historical data, calculators, and links to additional apps and readings.  \u003c\/p\u003e\u003cp\u003eDispelling the notions that the stock market is a mysterious arbiter of value, when, in fact, it is easy to understand the Risk Premium Factor Valuation Model is a game-changer for anyone who works in investments—from professional investors to corporate decision makers to private individuals. After all, if you don't understand how the market values businesses, you don't really understand the market at all.\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47990331965669,"sku":"NP9781118099056","price":85.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781118099056.jpg?v=1761787390","url":"https:\/\/k12savings.com\/products\/the-risk-premium-factor-website-isbn-9781118099056","provider":"K12savings","version":"1.0","type":"link"}