Not Enough Comps for Valuation? Try Statistical Modeling

Traditional approaches rely on data from comparable businesses—but such data aren’t always available. Statistical modeling can broaden the comparison while controlling for differences.

Overcoming a Bias Against Risk

Risk-averse midlevel managers making routine investment decisions can shift an entire company’s risk profile. An organization-wide stance toward risk can help.

Tim Koller, Dan Lovallo, and Zane Williams

Many of the managerial tactics used by companies in their capital-allocation and evaluation processes fail to take note of basic [behavioral biases]. By considering the success or failure of projects in isolation, for example, they fail to understand how each will add risk to the company’s overall portfolio and institutionalize a tendency toward risk aversion, essentially recreating the narrow framing that occurs at the individual … [ Read more ]

What Happened to the Bull Market?

By the time NASDAQ reached its peak in the recent bull market, many financial commentators had begun to accept the idea that stock market valuations were no longer driven solely by the traditional economic factors: earnings growth, inflation, and interest rates. Instead, they suggested, new factors—such as structural changes in the economy, new rules of economics, and the value of intangible assets and brands—justified the … [ Read more ]