Directors And Professors Treat Market Risk Differently

In "Market Risk Premium Used: Survey 2008," IESE Prof. Pablo Fernández put three simple questions to 424 business executives and professors, mostly Spaniards. What market risk premium does your company use? How is it justified? Did you use different premiums in previous years? The findings of the survey can be grouped into eight sections. First, there is a great spread between the companies and professors surveyed. The professors use premiums between 3.5 and 10 percent, and the businesses between 2 and 30 percent. Banks and financial firms, however, show a much smaller dispersion: between 2 percent and 8.2 percent. In addition, the average premium used by companies (6.3 percent) is higher than that used by professors (5.5 percent).