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.
Content: Article | Authors: Mimi James, Zane D. Williams | Source: McKinsey Quarterly | Subject: Finance
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.
Content: Article | Authors: Dan P. Lovallo, Tim Koller, Zane D. Williams | Source: McKinsey Quarterly | Subjects: Finance, Management, Organizational Behavior, Risk Management
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 ]
Content: Quotation | Authors: Dan P. Lovallo, Tim Koller, Zane D. Williams | Source: McKinsey Quarterly | Subject: Risk Management
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 ]
Content: Article | Authors: Tim Koller, Zane D. Williams | Source: McKinsey Quarterly | Subjects: Economics, Market/Investment | Industry: Investment Banking