Country Risk: The 2024 Update

If there is a lesson that I learned from the 2008 market crisis, it is that market crises almost always play out as big changes in the price of risk. In keeping with that lesson, I have been updating my implied equity risk premiums for the S&P 500 every month, and my country risk premiums twice a year. I have also created two annual updates, one on equity risk premiums that I publish in March of each year and the other on country risk that I publish in July each year. This session provides an abridged version of the my 2024 country risk premium update, starting with the drivers of country risk, moving on to measures (sovereign ratings, country risk scores, equity risk premiums) and closing with an explanation of how country risk plays out in business and investing decisions.
Blog Post:
Data:

[jojackborseman]

It's unbelievable that a top tier master of the subject is giving away all this knowledge for free (not just this video I mean. Everything on this channel). You just have to grab it and learn it.

Dr damodaran, you are most definitely one of the rare gems of this generation distributing knowledge that will help even the coming generations. I dont know if you will ever read this comment but I have learnt a lot from you. Thankyou so much sir!

[polobik]

Mr. Damodaran you truly are one of the great minds of this era

[georgethomas]

00:03 Post-2008, attention to the price of risk in mature equity markets has increased.
02:12 Differences in country risk across countries
06:40 Challenges of operating a business in violent environments
08:51 Corruption and property rights impact country risk.
13:17 Climate change impacts country risk through commodity dependence
15:26 Country risk is influenced by commodity dependence, life cycle stage, and climate change exposure.
19:35 Market-based alternative to sovereign ratings
21:26 PRS score measures country risk level.
25:14 Equity risk premiums are determined by ratings and PRS scores
27:01 Factors influencing hurdle rate calculation
30:43 Country risk affects enterprise value and EV/D ratio
32:35 Valuation of companies in different currencies affects discount rates and growth rates
36:15 Currency and company valuation should be kept separate for accurate assessment.
Crafted by Merlin AI.

[sucim]

What is outstanding about Aswath Damodaran is that he is a master of the theory but gives concrete examples to even the last little detail. Most academics and people in general gloss over the hard parts with words like "what not" and "whatever" (like mathematicians calling things "trivial") to give the impression that they are superior and evade thinking about the hard aspects at the same time

[mchandwani]

Simply Amazing!! Thank you for sharing!

[Stoltr]

I think this is the first time I really understood everything 😅 thank you so much for your videos ❤

[kumarapillay]

eagerly waiting for your halfway update on US stock market professor. Your valuation was spot on for this year!

[jerryfrancis]

Amazing! Thanks for your time and efforts. Valuable content.

[HOPCOUNT]

Just watched your Bloomberg segment with Alix sent me here.

[jackbailey]

As soon as he says he trusts The Economist for scoring political freedom, I tuned out.

[Bigagoo]

It’s kind of like a morality risk premium.

[FranklinPiens]

No corruption in the US. We call it 'Lobbying'.

[shaonghosh]

In the map of property rights I saw China in yellow. I did not realize that citizens in China had rights to property. I used to think that the government controls all the land, and the citizens are practically "leasing" it. If my property is built on the land owned by someone else, does it really give me full right to the property. Sure, I can sell the property and get the money back, but physical property is not really like stocks which is much more liquid. Shouldn't China be gray in this map? Of course, I understand that Aswath did not make this map, it's just a curious question about what was the metric behind making this map.

[ANShared]

Professor, great insights - would appreciate if you could use the correct map of India.

[johnhammer]

Hi, Is your books before 2002 are still useful. Should i read it. Thanks

[ashutoshshahi]

Mr. Damodaran, Pls use the correct map of India

[arangotan]

If one has an ADR in USD would you use the US risk premium or the risk premium of the home country? Anyone know?

[tempioxavo]

Hey prof, what about Lehman swaps due on september 😂
It's all a joke none of this matters, it's only purely reflexivity...

[friendeleven]

Model is erroneous. If US has less country risk than China it is impossible

[SSPParthas]

Can liquidity postpone the risk? How will impact the too much of liquidity ?