Even though, according to traditional financial theory, public markets do not price company-specific risk, it does not mean that it does not exist or is not quantifiable for public comparables. In all instances, the company-specific risk premium for publicly traded companies is greater than 0%—yet appraisers start their benchmark analysis at 0% to determine an appropriate company-specific risk premium for privately held companies. Is this a flaw in our collective thinking?

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© 2006 American Society of Appraisers
2006
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