Archive 2011-43: Correct Way to Use Ibbotson and D&P Data




Archive 2011-43: The Correct Way to Use Ibbotson and Duff & Phelps Risk Premium Data

Presented by
James P. Harrington and Magdalena Mroczek

Webinar 43 Broadcast Date: October 19, 2011

Morningstar/Ibbotson and Duff & Phelps will join forces and present their views on the correct way to calculate the cost of equity capital. Recent
VPS polls show that approximately 50% of our webinar participants use both Ibbotson and D&P data. You can’t afford to miss this unique presentation
where the leaders of the respective Ibbotson SBBI Yearbook and the D&P Risk Premium Report jointly present new data and applications
to help you calculate and support all the inputs to the cost of equity capital.

Webinar Outline:

  • Equity risk premiums
    • Ibbotson supply side vs. historical/traditional including a new look at what’s behind the supply side data
    • Ibbotson adjusted vs. unadjusted
    • Duff & Phelps (D&P) adjusted vs. unadjusted
    • D&P conditional vs. unconditional
  • Size premiums
    • Recent attacks on the size premium
    • Why the size premium is still a valid input
    • Why the addition of a size premium does not preclude use of a discount for lack of marketability/liquidity
    • Ibbotson 10, 10a, 10b, 10w, 10x, 10y, 10z
    • D&P 24th and 25th category
    • D&P combined vs. separate – why are they different and which one is correct
  • Ibbotson industry risk premiums
    • Explained in further detail with recommendations on their use
  • Specific company risk
    • Using D&P data to help calculate this difficult area
  • Risk free rate
    • Should you adjust the risk free rate, the equity risk premium or both in a changing economy
    • D&P risk premium calculator

    Learning Objectives:

    · The participant will learn the correct way to use Ibbotson and Duff & Phelps risk premium data

    · The participant will learn a renewed look at the building blocks of cost of capital

    · The participant will learn what’s behind all the cost of capital inputs

    · The participant will learn how to use D&P data to calculate specific company risk

    · The participant will learn Morningstar’s and D&P’s views on whether the size premium still exists and recent criticisms of the size effect

    · The participant will learn that the addition of a size premium does not preclude use of a discount for lack of marketability/liquidity

    · The participant will learn common misunderstandings in using Ibbotson data including equity risk premiums, industry risk premiums and size premiums

    · The participant will learn new information about industry risk premiums and their use

    · The participant will learn about whether and how to use the Ibbotson supply side equity risk premium and the assumptions made in the model

    · The participant will learn the latest D&P estimate of the equity risk premium (as of September 2011)

    · The participant will learn about the new D&P risk premium calculator

Included in this downloadable package are:

  • Audio/Video file
  • Webinar transcript
  • Original Webinar handouts

The archived webinar package is an Adobe Presenter PDF file that allows you to view the video of the webinar with the synced audio so that you see the presentation just as it was presented “live.” The Presenter format also allows for easy navigation through the webinar so you can quickly go to a specific section in the presentation. The handout materials are included in the file. To view the Webinar Presenter file, you must have Adobe Reader software version 9 or higher. You can download the free current version of Adobe Reader at Please note that CPE is only available for live webinar broadcasts.

Additional information

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