"Pure-vanilla utility stocks probably aren't too risky, but the valuations aren't extremely low, either," he said.
One explanation is that it's the basic job of a VC to make risky bets at valuations which are supposed to reflect future promise and may never materialize.
Our results are also consistent with economic studies showing that the magnitude of potential wins/losses influences the valuation of risky gambles (Bossaerts & Plott, 2004; Holt & Laury, 2002; Lichtenstein & Slovic, 1971; Slovic et al., 2007; Slovic & Lichtenstein, 1968), and they extend this finding to EDA sensitivity.
This helps government leaders finance spending and stimulate their economies, but it hurts the returns on fixed income investments and pushes capital into riskier assets to find higher yield.The result is an increase in the valuation of riskier assets, which decreases expected long-term returns.
But at least four downside risks are likely to materialise this year, undermining global growth and eventually negatively affecting investor confidence and market valuations of risky assets.
So Ballmers choices: buy a second-best asset, buy a lot of risky startups at nosebleed valuations, or leave $50 million in the bank earning nothing at todays rates, while remaining substantially dependent on a core business that looks shakier today than it did last quarter.
Competing on original rather than old content is a risky proposition, and requires new valuation metrics for one of Wall Street's hot stocks.
While there is no question that Snapchat is gaining traction, particularly with the millennial demographic, the hefty valuation can be risky.
Since utility functions are subjective, different firms and people can approach any given risky event with quite different valuations.
We now address the question raised in Section 2.8.2: can we disentangle the counterparty risk-free valuation of a credit risky contract from the CRR valuation?
