You know the greenies have infiltrated the Climate Change Authority when you read the following in their recent draft report
Australia's commitment to Kyoto was to keep our emissions to 108% of 1990 levels. While you wouldn't read about it, we are actually ahead of the game. Our emissions are actually at 105% of 1990 levels. Well done team!
The thing is, that gives us around 91 MT of emissions we could carryover into our new emissions target if we decided to sign up to the new Kyoto protocol. That's great. Start on the front foot, ahead of the game. But guess what I found in the report
They are recommending we take the 3% and create an even more aggressive target to try and influence other countries to take on more aggressive targets! As if. We have zero influence with the developing world on this regard and China would laugh at us if we decided to suggest they sign up to these aggressive targets. It could be worse of course. Some of the recommendations offered by Green groups proposed voluntarily extinguishing the credits.
Thankfully, we have a Liberal Government in power who will no doubt disregard the advice, but it just goes to show how the Climate Change Authority is not really economically dry when it comes to offering advice.
Wednesday, October 30, 2013
Reserve Bank Assets - Increasingly sensitive to Foreign Currency
Been having a look at the Reserve Bank of Australian assets after our new Treasurer, Joe Hockey decided to grant the bank a capital injection of 8.8 billion. Nice.
I was wondering why that may be the case. Reserve banks can operate with negative capital reserve if required as they can also print their way out of debt if required (though obviously not in times of higher inflation). In fact, the best time to do that might be at the moment, with inflation fairly low.
But another reason may be sensitivity to interest rates and or foreign currency. The days of Reserve Banks having gold as their main reserve has long gone. It's usually foreign currency and bonds now. So I wanted to see what affect changes of foreign currency, domestic interest rates and gold prices have on the Total Reserves.
So I regressed percentage changes in Total Assets against % changes in those other elements and got the following (Since 2005)
%TR = -0.87*%AUD/US +0.07*%10 years AUS BOND (I removed gold as it wasn't statistically significant at all)
Only the -0.87 is statistically significant at 95% confidence level. So that equates to every 1% increase in AUD/US exchange rate reduces the assets of the Reserve by almost 1% (keeping interest rates constant)
With the capital Reserve currently sitting at just over 2% of total assets, that might explain the urgency of the Capital injection (as the currency would only require 2.5% appreciation against the greenback to wipe it out)***
Maybe Joe is onto something.
**That said, the regression's adjusted RSquared is only 17%, but still goes to show that a high dollar is not the greatest thing from a Reserve point of view
I was wondering why that may be the case. Reserve banks can operate with negative capital reserve if required as they can also print their way out of debt if required (though obviously not in times of higher inflation). In fact, the best time to do that might be at the moment, with inflation fairly low.
But another reason may be sensitivity to interest rates and or foreign currency. The days of Reserve Banks having gold as their main reserve has long gone. It's usually foreign currency and bonds now. So I wanted to see what affect changes of foreign currency, domestic interest rates and gold prices have on the Total Reserves.
So I regressed percentage changes in Total Assets against % changes in those other elements and got the following (Since 2005)
%TR = -0.87*%AUD/US +0.07*%10 years AUS BOND (I removed gold as it wasn't statistically significant at all)
Only the -0.87 is statistically significant at 95% confidence level. So that equates to every 1% increase in AUD/US exchange rate reduces the assets of the Reserve by almost 1% (keeping interest rates constant)
With the capital Reserve currently sitting at just over 2% of total assets, that might explain the urgency of the Capital injection (as the currency would only require 2.5% appreciation against the greenback to wipe it out)***
Maybe Joe is onto something.
**That said, the regression's adjusted RSquared is only 17%, but still goes to show that a high dollar is not the greatest thing from a Reserve point of view
Tuesday, October 29, 2013
Update: Carsales a cluncker Part 2 - Start her up!
Looking in more detail as to why the sell off of CarSales...I think it's all panic selling. The CEO mentioned subdued conditions, but this is a company who pays out 90% of profit as dividends and still has a sustainable growth rate of 5% (due to a ROE of over 50%!). Even the ROA is pretty impressive (34%) Easily making the cost of equity of 10.5% over the last two years.
As for growth, car sales are a pretty good model as they are linked to economic growth but a site like this also links to the secondary market (used cars) which does better when times are tough. A bit of exposure to underdeveloped car markets like Brazil and Thailand completes the picture.
Sure, the model isn't exactly competition free. Lots of potential competitors out there, but with a good, experienenced board well versed in car sales and dealerships, I think this is still a business with potential.
In fact, if I do my calculation of FCFE using the gordon growth model, I have a price target of $12.69. As the shares are trading at around 10.33, this represents an 18% discount.
But I could be wrong again.
Disclaimer : Not an recommendation to invest/not invest in CarSales. Please see your financial advisor.
As for growth, car sales are a pretty good model as they are linked to economic growth but a site like this also links to the secondary market (used cars) which does better when times are tough. A bit of exposure to underdeveloped car markets like Brazil and Thailand completes the picture.
Sure, the model isn't exactly competition free. Lots of potential competitors out there, but with a good, experienenced board well versed in car sales and dealerships, I think this is still a business with potential.
In fact, if I do my calculation of FCFE using the gordon growth model, I have a price target of $12.69. As the shares are trading at around 10.33, this represents an 18% discount.
But I could be wrong again.
Disclaimer : Not an recommendation to invest/not invest in CarSales. Please see your financial advisor.
Carsales a clucker? Doubt it
Carsales has appeared on the ROC radar last night...seems to be a bit shunned for some reason. Big volumes of sales over the last couple of days (average daily volumes is around 800,000, but last two days sold off around 3 million shares a day). Wonder why?
Most technical indicators seem to indicate a buy. ROC below 90, price at the bottom of the bollinger bands etc. Could be an opportunity. Or does the market know something I don't (probably lots). Will have to investigate a little more, but low 10's for this stock seems great value at first look.
Most technical indicators seem to indicate a buy. ROC below 90, price at the bottom of the bollinger bands etc. Could be an opportunity. Or does the market know something I don't (probably lots). Will have to investigate a little more, but low 10's for this stock seems great value at first look.
Friday, October 25, 2013
Being Arian Foster....well at least 20%
Have heard about the novel security being offered in the US concerning the NFL star Arian Foster. He has decided to sell the rights 20% of future earning for the upfront price of $10,000,000. The company that has bought the rights, fantex has in turn decided to issue 1,000,555 shares at $10 a pop to people who want to invest. Interesting stuff. The question I have is if it is a good investment. So I checked out the IPO docs. Couple of red flags
1. Firstly, this is not a growth stock. Arian Foster is 4 years into a NFL career and is currently at the peak of his powers. His previous contract (in the 2nd year of a 5 year one) is probably his best (as he is 27 and when he comes off the current one, he will be 30-31....and definitely on the decline. Post career earnings are unlikely to be as good as his NFL earnings (especially as the deal with FanTex deliberately excludes investment income)
2. As shareholders, you actually are shareholders of a company FanTex Limited rather than Arian Foster. So the Financial Asset could be sold leaving the shareholders with nothing
3. There is no secondary market for the shares. You are basically stuck with them after you have bought them.
4. The company is under no obligation to pay dividends.
5. The company has entered into an agreement with a holding company Fantex Holdings and will pay 5% of earning to them for "Management Services"
6. The stock can be diluted at any time with the addition of new "star's". Also with this initial IPO, there is a dilution that will take around $2 off the share price as current stock is converted to the new share structure.
7. The holding company will control 99% of the voting stock, meaning the shareholders will have no power at all after this offer.
So is it a good deal? Well I will let the fans decide.
Disclaimer: Not a recommendation to invest/not invest with FanTex. See your financial advisor
1. Firstly, this is not a growth stock. Arian Foster is 4 years into a NFL career and is currently at the peak of his powers. His previous contract (in the 2nd year of a 5 year one) is probably his best (as he is 27 and when he comes off the current one, he will be 30-31....and definitely on the decline. Post career earnings are unlikely to be as good as his NFL earnings (especially as the deal with FanTex deliberately excludes investment income)
2. As shareholders, you actually are shareholders of a company FanTex Limited rather than Arian Foster. So the Financial Asset could be sold leaving the shareholders with nothing
3. There is no secondary market for the shares. You are basically stuck with them after you have bought them.
4. The company is under no obligation to pay dividends.
5. The company has entered into an agreement with a holding company Fantex Holdings and will pay 5% of earning to them for "Management Services"
6. The stock can be diluted at any time with the addition of new "star's". Also with this initial IPO, there is a dilution that will take around $2 off the share price as current stock is converted to the new share structure.
7. The holding company will control 99% of the voting stock, meaning the shareholders will have no power at all after this offer.
So is it a good deal? Well I will let the fans decide.
Disclaimer: Not a recommendation to invest/not invest with FanTex. See your financial advisor
Wednesday, October 23, 2013
Same Sex Marriage in the ACT - Think the bride will be left at the altar
While this is primarily a finance/economic blog, occasionally I will comment on other subjects that might be indirectly related to economics, like Climate Change. Another area is marriage.
Generally speaking marriage is good for an economy in that it promotes population growth and civil order, two things important for economic growth.
Same Sex Marriage is a little different. Certainly doesn't promote population growth (hard to have kids when a key component to a process is missing) but there may be an argument for civil order. Love is always a consideration, but as an economic dry, I'm leaving it out of the equation (One cannot live on love alone as they say). Human Rights, while important, is also not really an issue (as while Marriage is defined as a Human Right, the definition of marriage and who is eligible has always been left to country to decide under international law treaties)
Now in the last few days, the Australian Capital Territory has passed a law allowing Same Sex Marriages to be performed in it's territory. The left has responded in celebration....Hooray! Human Rights for all etc.
However, if you look at the Constitution, it doesn't look that great for the laws. I think they will ultimately be overruled by the Commonwealth.
The reason for this pessimism is basically the Constitution. Firstly, in the Constitution’s Section 51(11), it explicitly states that the Federal Government has the power to make laws responsible for Marriage.
Secondly there is Section 109 which states, and I quote "When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid"
So that pretty much rules out any state in Australia being able to make laws in respect to Marriage, from a constitutional point of view.
Now someone could argue that the ACT is a territory rather than a state. Very true, young person. Problem is Section 52(i) of the Constitution which states
"The Parliament shall, subject to this Constitution, have exclusive power to make laws for the peace, order, and good government of the Commonwealth with respect to
(i.) The seat of government of the Commonwealth, and all places acquired by the Commonwealth for public purposes"
And the seat of government of the Commonwealth is...drumroll please, the Australian Capital Territory! Yep, that means that the ACT is completely beholden to the Fed's in regards to laws. The Federal Government could just change "Australian Capital Territory (Self-Government) Act 1988 (Cth)" like they did to the Northern Territory's Self-Government Act when that territory got uppity and got Euthanasia legalised back in 1995. All they need is the numbers in the House of Reps (no worries) and the Senate (a bit more difficult at the moment, but probably still an option). Will definitely be fine once the new Senate rocks up in July 2014.
Remember, it's not just the Libs that hold marriage as defined as a union entered into by a man and woman. Plenty of Laborites also believe this (as shown by the votes of the previous federal attempts to change the Marriage Act)
By my reading, the only way Same Sex Marriage could get up in the near future would be to take marriage out of it and call it "Same Sex Civil Unions" (with all the rights and legal protections of marriage). I think politicians on both sides could get this up at a Federal Level. But will the Gay and Lesbian Lobby see this, or will they still hold out for the "marriage" bouquet to be thrown at them.
If they wait, they could be waiting a long time.
Generally speaking marriage is good for an economy in that it promotes population growth and civil order, two things important for economic growth.
Same Sex Marriage is a little different. Certainly doesn't promote population growth (hard to have kids when a key component to a process is missing) but there may be an argument for civil order. Love is always a consideration, but as an economic dry, I'm leaving it out of the equation (One cannot live on love alone as they say). Human Rights, while important, is also not really an issue (as while Marriage is defined as a Human Right, the definition of marriage and who is eligible has always been left to country to decide under international law treaties)
Now in the last few days, the Australian Capital Territory has passed a law allowing Same Sex Marriages to be performed in it's territory. The left has responded in celebration....Hooray! Human Rights for all etc.
However, if you look at the Constitution, it doesn't look that great for the laws. I think they will ultimately be overruled by the Commonwealth.
The reason for this pessimism is basically the Constitution. Firstly, in the Constitution’s Section 51(11), it explicitly states that the Federal Government has the power to make laws responsible for Marriage.
Secondly there is Section 109 which states, and I quote "When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid"
So that pretty much rules out any state in Australia being able to make laws in respect to Marriage, from a constitutional point of view.
Now someone could argue that the ACT is a territory rather than a state. Very true, young person. Problem is Section 52(i) of the Constitution which states
"The Parliament shall, subject to this Constitution, have exclusive power to make laws for the peace, order, and good government of the Commonwealth with respect to
(i.) The seat of government of the Commonwealth, and all places acquired by the Commonwealth for public purposes"
And the seat of government of the Commonwealth is...drumroll please, the Australian Capital Territory! Yep, that means that the ACT is completely beholden to the Fed's in regards to laws. The Federal Government could just change "Australian Capital Territory (Self-Government) Act 1988 (Cth)" like they did to the Northern Territory's Self-Government Act when that territory got uppity and got Euthanasia legalised back in 1995. All they need is the numbers in the House of Reps (no worries) and the Senate (a bit more difficult at the moment, but probably still an option). Will definitely be fine once the new Senate rocks up in July 2014.
Remember, it's not just the Libs that hold marriage as defined as a union entered into by a man and woman. Plenty of Laborites also believe this (as shown by the votes of the previous federal attempts to change the Marriage Act)
By my reading, the only way Same Sex Marriage could get up in the near future would be to take marriage out of it and call it "Same Sex Civil Unions" (with all the rights and legal protections of marriage). I think politicians on both sides could get this up at a Federal Level. But will the Gay and Lesbian Lobby see this, or will they still hold out for the "marriage" bouquet to be thrown at them.
If they wait, they could be waiting a long time.
Tuesday, October 22, 2013
Qantas a buy? Might be worth while to ride the lightning
Qantas, of all companies, appeared on my ROC scanner last night...it has dropped a fair bit of value over the last couple of days since the AGM. Currently sitting at $1.30. So I'm curious...is it worth a buy.
Fundamentals don't look great. Making a minimal ROE of 0.1% (or basically nothing). Compared to the WACC I have calculated of around 6% (way below the 10.5% used by Qantas themselves), it still isn't making it's costs of capital meaning that ultimately, the book value will continue to drop.
Current tangible book value for share is $2.42, but I'm not surprised that it isn't trading at that. If a company doesn't make its WACC, book value only goes one way....down.
All that said, $1.30 does look cheap. Using DCF methods using FCFF of $330 million and the WACC of 6% and a growth rate of between (-2% to -3%....the guidance given for yields at the AGM), I have a price target of between $1.80 and $1.58...at least a 21% premium to the current price.
Boarding!
Disclaimer: This is not a recommendation to invest/not invest in Qantas. Please see your financial advisor.
Fundamentals don't look great. Making a minimal ROE of 0.1% (or basically nothing). Compared to the WACC I have calculated of around 6% (way below the 10.5% used by Qantas themselves), it still isn't making it's costs of capital meaning that ultimately, the book value will continue to drop.
Current tangible book value for share is $2.42, but I'm not surprised that it isn't trading at that. If a company doesn't make its WACC, book value only goes one way....down.
All that said, $1.30 does look cheap. Using DCF methods using FCFF of $330 million and the WACC of 6% and a growth rate of between (-2% to -3%....the guidance given for yields at the AGM), I have a price target of between $1.80 and $1.58...at least a 21% premium to the current price.
Boarding!
Disclaimer: This is not a recommendation to invest/not invest in Qantas. Please see your financial advisor.
Friday, October 18, 2013
WACC of Aurizon: 7.72%
Was reading the AFR as usual, and discovered an article about QLD rail (now known as Aurizon), specifically the WACC estimate. Weighted average costs of capital are important in Government regulation as most regulations allow monopolies to earn at least their WACC in regards to prices. So the higher the WACC, the more the monpoly can charge.
Aurizon believe their WACC is 8.17%, Queensland Resources Council (a lobby group for miners who pay to use the trains) believe it is 5.6%. You know what, I recon it is right in the middle. Lets see.
Formula for the WACC is usually the (weighted interest rate of borrowings)*(1-TaxRate)*(% of Debt on Capital) + (Cost of Equity Capital)*(% of Equity on Total Capital).
Firstly, from the Annual report: Average weighted interest rate of Aurizon borrowings over the last 2 years = 0.055.
Tax Rate = 0.3 (Australian Company tax rate)
Average Borrowings over the last two years (from 2013 Annual report) = $1.84 Billion
Average Equity Shares Outstanding over last two years (from 2013 Annual Report) = 2.348 Billion
Average Share Price over the last two years (From Yahoo Finance) ($3.78)
Therefore Equity total = $8.878 Billion
Total Capital = 10.78 Billion (17% debt, 83% equity). Based on this, WACC is likely to be on the higher side (as Equity is more expensive than debt)
Calculating the cost of Equity. The adjusted Beta of Aurizon (based on last 2.5 years of Aurizon and ASX200 returns) = 0.7262
Risk Free rate of 0.0382 and Market risk premium of 0.0352 already calculated on this blog
Using CAPM formula, this gives us a rate of return of 0.0637. Add on an average dividend yield over the last two years of 2.1%, gives you a cost of equity capital being 0.0847.
So putting all this info into the WACC formula gives you a grand WACC of Aurizon being 0.07721 (or 7.721%)
So how does this compare to those original forecasts. Well, no doubt that Aurizon has put on a hefty 450 basis points onto their estimate. But QRC would be getting an absolute bargain with their estimate of 5.6% (or a 2.1% discount). Go back to Finance school guys.
Aurizon believe their WACC is 8.17%, Queensland Resources Council (a lobby group for miners who pay to use the trains) believe it is 5.6%. You know what, I recon it is right in the middle. Lets see.
Formula for the WACC is usually the (weighted interest rate of borrowings)*(1-TaxRate)*(% of Debt on Capital) + (Cost of Equity Capital)*(% of Equity on Total Capital).
Firstly, from the Annual report: Average weighted interest rate of Aurizon borrowings over the last 2 years = 0.055.
Tax Rate = 0.3 (Australian Company tax rate)
Average Borrowings over the last two years (from 2013 Annual report) = $1.84 Billion
Average Equity Shares Outstanding over last two years (from 2013 Annual Report) = 2.348 Billion
Average Share Price over the last two years (From Yahoo Finance) ($3.78)
Therefore Equity total = $8.878 Billion
Total Capital = 10.78 Billion (17% debt, 83% equity). Based on this, WACC is likely to be on the higher side (as Equity is more expensive than debt)
Calculating the cost of Equity. The adjusted Beta of Aurizon (based on last 2.5 years of Aurizon and ASX200 returns) = 0.7262
Risk Free rate of 0.0382 and Market risk premium of 0.0352 already calculated on this blog
Using CAPM formula, this gives us a rate of return of 0.0637. Add on an average dividend yield over the last two years of 2.1%, gives you a cost of equity capital being 0.0847.
So putting all this info into the WACC formula gives you a grand WACC of Aurizon being 0.07721 (or 7.721%)
So how does this compare to those original forecasts. Well, no doubt that Aurizon has put on a hefty 450 basis points onto their estimate. But QRC would be getting an absolute bargain with their estimate of 5.6% (or a 2.1% discount). Go back to Finance school guys.
Monday, October 14, 2013
Twitter Vs Facebook - The Directors cut
The first in a series of posts comparing the Twitter IPO to Facebook. First up, the board of Directors
Facebook :-
Mark Zukerberg
Sheryl K. Sandberg
Erskine B. Bowles
Marc L. Andreessen
James W. Breyer
Susan D. Desmond-Hellman
Donald E. Graham
Reed Hastings
Peter A. Thiel
Vs
Twitter :-
Peter Fenton
Richard Costolo
David Rosenblatt
Evan Williams
Peter Chernin
Peter Currie
Jack Dorsey
Comments : All star cast of Facebook vs some quality at Twitter. 22% of women on Facebook vs 0% on the Twitboard. At least three IT visionaries on the Facebook board in Zukerberg, Andreesen and Hastings, plus serious political clout in Bowles and Sandberg.
Winner is : Facebook!
Facebook :-
Mark Zukerberg
Sheryl K. Sandberg
Erskine B. Bowles
Marc L. Andreessen
James W. Breyer
Susan D. Desmond-Hellman
Donald E. Graham
Reed Hastings
Peter A. Thiel
Vs
Twitter :-
Peter Fenton
Richard Costolo
David Rosenblatt
Evan Williams
Peter Chernin
Peter Currie
Jack Dorsey
Comments : All star cast of Facebook vs some quality at Twitter. 22% of women on Facebook vs 0% on the Twitboard. At least three IT visionaries on the Facebook board in Zukerberg, Andreesen and Hastings, plus serious political clout in Bowles and Sandberg.
Winner is : Facebook!
Oroton in the toilet?
Oroton, the luxury goods brand has come onto the Goat's ROC tracker as a possible undervalued company, but I'm starting to think it looks more trash than treasure.
A few reasons :-
Firstly, being a luxury goods company, generally not recession proof. In Australia, unemployment is predicted to rise and economic growth to reduce, not ideal conditions for a high end retailer.
Secondly, they just lost the Ralph Lauren Licence which provided close to 50% of revenue. The replacement, Brooks Brothers has come on line, true, but lets be honest, Brooks Brothers is no Ralph Lauren.
Thirdly, take out discontinued operations and the 12 million they received from Ralph Lauren and the profits look to be falling and cash flow starting to turn south again.
Fourthly, they have limited exposure to Asia (just 3% of group sales)
Lastly, the board has no women on it, since the departure of the CEO last year. Not a good look for a company that caters primarily to women.
So all, up I won't be investing. Better options out there is you want to invest in a Retailer.
Disclosure: Not a recommendation to invest/not invest in Oroton. Please see a Financial advisor
A few reasons :-
Firstly, being a luxury goods company, generally not recession proof. In Australia, unemployment is predicted to rise and economic growth to reduce, not ideal conditions for a high end retailer.
Secondly, they just lost the Ralph Lauren Licence which provided close to 50% of revenue. The replacement, Brooks Brothers has come on line, true, but lets be honest, Brooks Brothers is no Ralph Lauren.
Thirdly, take out discontinued operations and the 12 million they received from Ralph Lauren and the profits look to be falling and cash flow starting to turn south again.
Fourthly, they have limited exposure to Asia (just 3% of group sales)
Lastly, the board has no women on it, since the departure of the CEO last year. Not a good look for a company that caters primarily to women.
So all, up I won't be investing. Better options out there is you want to invest in a Retailer.
Disclosure: Not a recommendation to invest/not invest in Oroton. Please see a Financial advisor
Wednesday, October 9, 2013
The Job's effect : Did Steve Job's death affect Apple.
Well obviously! But what I really wanted to know if it affected the share price. Lets look at some comparisons. Here are the stcks prices of Apple (and others) in comparison with the Dow Jones Industrial Average with the base year being October 2009 (monthly stock prices, no dividends)
So as shown, if you invested in Apple or Amazon, you would have outperformed the Dow by around 60%. Go team. The others, you would be treading water a bit, with the exception of Microsoft where you would be off roughly 20%. Poor Bill Gates!
However, if you make the date of Steve Job's death the base year (October 2011), it gets a little murkier
On this reading, Apple is pretty much treading water with the index, along with Microsoft, IBM is 20% off the Dow and it's Google and Amazon that are outperforming the market by around 16%.
So I don't think there is any doubt that Steve Jobs' death has made Apple a less attractive proposition from an investor point of view (even with that temporary surge in 2012), with that money going into Google and Amazon. Amazon, looks like the only sure bet from either 2009 or 2011. Go the cloud!
However, if you make the date of Steve Job's death the base year (October 2011), it gets a little murkier
On this reading, Apple is pretty much treading water with the index, along with Microsoft, IBM is 20% off the Dow and it's Google and Amazon that are outperforming the market by around 16%.
So I don't think there is any doubt that Steve Jobs' death has made Apple a less attractive proposition from an investor point of view (even with that temporary surge in 2012), with that money going into Google and Amazon. Amazon, looks like the only sure bet from either 2009 or 2011. Go the cloud!
Wednesday, October 2, 2013
Market Risk Premium for September 13 - 3.52%
Time for another update of the ASX Market Risk Premium. I would assume there has been some improvement here as the ASX has increased in value.
So using our 2.5 years of daily returns of the ASX200, I calculate a capital gain p.a of 2.68%. Combined with the average dividend yield over this period of 4.64%, that gives us a market return of 7.34% (not too shabby)
Looking at the average 10 year government bond rate over the period as a proxy, we have our risk free rate being 3.82%
Which means that our market risk premium is now 3.52%
So using our 2.5 years of daily returns of the ASX200, I calculate a capital gain p.a of 2.68%. Combined with the average dividend yield over this period of 4.64%, that gives us a market return of 7.34% (not too shabby)
Looking at the average 10 year government bond rate over the period as a proxy, we have our risk free rate being 3.82%
Which means that our market risk premium is now 3.52%
Subscribe to:
Posts (Atom)