With the frequently updated one-pager from our Deal & Valuation Advisory experts, you’ll get an insight into the latest key drivers relevant for valuation purposes.
More specifically, we’re showing you the Market Risk Premium (MRP) for Belgium and Europe, using a proprietary model (cf. below), as well as Trading Multiples (Europe).
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Market Risk Premium (MRP) Calculation Methodology
Our methodology for calculating the MRP is based on a weighted average of three approaches, providing a comprehensive perspective that integrates current and historical market sentiments.
These approaches include:
1. Forward-Looking Approach:
This approach employs dividend discount models (DDM) and residual income valuation models, relying on real-time market data. In Belgium, this analysis is based on indices from the Brussels Stock Exchange, while for Europe, data from the STOXX Europe 600 Index are used. This ensures that the MRP reflects current investor expectations and market dynamics.
2. Historical Approach:
The historical approach derives the MRP from previously computed Equity Risk Premiums (ERP) for Belgium and Europe. By considering long-term trends, this method provides a reliable historical benchmark for expected market risk.
3. Survey-Based Approach:
Relying on empirical studies and expert surveys, this approach incorporates views from academic research and market professionals regarding the appropriate MRP. This method ensures that the MRP estimate aligns with prevailing market insights and expert opinion.
