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Market Risk Premium: Improving The DCF Model Using VWAP and Bollinger Bands to Estimate Growth

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Market risk premium is one of the most important parameters in finance. Various estimation methods are used with the aim of accurately estimating market risk premium. Business and industry professionals rely and depend on accurate estimations of MRP. In this paper, we will propose a variation of the discounted cash flow model by Harris and Marston (1999) used to estimate MRP. Our model will seek to estimate a growth factor using volume weighted average price and Bollinger Bands, as opposed to using analysts’ forecasts as a proxy for growth. Our results show that our model is able to produce statistically significant results that capture market trends, while also eliminating the risk of analysts’ bias.
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Copyright is held by the author(s).
Scholarly level
Supervisor or Senior Supervisor
Thesis advisor: Klein, Peter
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Samin-Samer_Fall2020GP.pdf 2.34 MB

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