The benchmark indices were IA SBBI
S&P 500 (large cap), S&P 400 (mid cap) and S&P 600 (small cap) indexes.
REALTB denotes the real 1-month Treasury bill (SBBI
), percent per month.
The stock price and dividend data are from the CRSP Indices files and consumer prices used to deflate the nominal series is from the Stock, Bonds, Bills, and Inflation (SBBI
) series (Ibbotson and Associates).
New -- 2001 Stocks, Bonds, Bills and Inflation[R] (SBBI
) Valuation Edition Yearbook (No.
Next, the paper offers a critical look at the SBBI
manual and at efforts to update the material, such as revising inventories of learners' style and language strategy preferences.
Stocks, Bonds, Bills, and Inflation (SBBI
), 1994 Yearbook, Exhibit 48.
Since the intermediate term equity risk premium is approximately 7.5% (SBBI
1994 Yearbook, Ibbotson Associates), Equation 1 simplifies to:
This information can be found in Stocks, Bonds, Bills and Inflation (SBBI
) by Ibbotson Associates which is published annually.
(9) I derive corporate and government bond returns from the Ibbotson SBBI
2009 Classic Yearbook: Market Results for Stocks, Bonds, Bills and Inflation.
Corporate Bonds (20 years) 6.2% (1) Large-Cap Stocks 11.8% (1) Micro-Cap Stocks 18.2% (2) (1) Source: SBBI
Valuation Edition 2010 Yearbook.
[RI.sub.i] = the risk index for the industry IRP = (3.24 x 6.5%)--6.5% = 14.56% [K.sub.s] = 3.0% + 6.5% + 5.81% + 14.56% = 29.87% or 30.0% (rounded) See Ibbotson SBBI
Yearbook for annual premiums (Ibbotson Valuation Yearbook, http://www.ibbotson.com).
As required in any income approach, an appropriate discount rate for the current technology was determined, where we considered both the implied WACC of the transaction and, more importantly, market-derived discount rates that can be retrieved from literature like Morningstar Inc's SBBI