By
Borsgade
In this article and supporting video, Aswath provides an update to his country risk premium, starting with the drivers of country risk, moving on to measures (sovereign ratings, country risk scores, equity risk premiums) and closing with an explanation of how country risk plays out in business and investing decisions.
Understanding and measuring country risk is crucial for businesses and investors. Country risk varies due to political structures, corruption, war, violence, and legal protections. Sovereign ratings, country risk scores, and equity risk premiums are essential tools for quantifying these risks. Businesses must adjust their cost of capital based on these measures to avoid cross-subsidization, while investors should consider the geographic operations of companies. Consistency in valuation, including currency effects, is vital for accurate risk assessment and informed decision-making.
If there is a lesson that I learned from the 2008 market crisis, it is that market crises almost always play out as big changes in the price of risk. In keeping with that lesson, I have been updating my implied equity risk premiums for the S&P 500 every month, and my country risk premiums twice a year.
Share the news
The above has been prepared by Børsgade ApS for information purposes and cannot be regarded as a solicitation or recommendation to buy or sell any security. Nor can the information etc. be regarded as recommendations or advice of a legal, accounting or tax nature. Børsgade cannot be held liable for losses caused by customers’/users’ actions – or lack thereof – based on the information in the above. We have made every effort to ensure that the information in the above is complete and accurate, but cannot guarantee this and accept no liability for errors or omissions.
Readers are advised that investing may involve a risk of loss that cannot be determined in advance, and that past performance and price development cannot be used as a reliable indicator of future performance and price development. For further information please contact info@borsgade.dk
In his 2025 Annual Investor Presentation, Bill Ackman provides his view on Pershing Square Holdings (PSH) strategic roadmap. Bill also shares his in depth thoughts on the portfolio and key business developments in the companies he owns such as Nike, Brookfield and Uber.
In this interview, British investing icon Terry Smith, the manager of the UK’s largest stock fund Fundsmith, shares his lessons after a lifetime of investing. Terry delves into the skills, personality traits, and principles that propelled him from humble beginnings to the top of the investing world.
In his recent article, NYU professor Aswath Damodaran discusses the disruptive entry of DeepSeek, a Chinese AI company, into the artificial intelligence (AI) landscape and its implications for the broader AI narrative.
In this article, AQR assess the assumption built into today’s market and what that likely will mean for forward returns. These insights aim to guide investors in setting realistic medium-term (5-10 years) expectations while emphasizing the importance of valuation discipline and diversification in navigating compressed risk premia across asset classes.
