Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, Third Edition

Preface to the Third Edition

This is a book about valuation—the valuation of stocks, bonds, options, futures and real assets. It is a fundamental precept of this book that any asset can be valued, albeit imprecisely in some cases. I have attempted to provide a sense of not only the differences between the models used to value different types of assets, but also the common elements in these models.

The past decade has been an eventful one for those interested in valuation for several reasons. First, the growth of Asian and Latin American markets brought emerging market companies into the forefront, and you will see the increased focus on these companies in this edition. Second, we saw the havoc wreaked by macroeconomic factors on company valuations during the bank crisis of 2008, and a blurring of the lines between developed and emerging markets. The lessons I learned about financial fundamentals during the crisis about risk-free rates, risk premiums and cash flow estimation are incorporated into the text. Third, the past year has seen the influx of social media companies, with small revenues and outsized market capitalizations, in an eerie replay of the dot-com boom from the late 1990s. More than ever, it made clear that the more things change, the more they stay the same. Finally, the entry of new players into equity markets (hedge funds, private equity investors and high-frequency traders) has changed markets and investing dramatically. With each shift, the perennial question ...