Y.Kozir & Panferov: A Dispute between Little-Ender and Big-Ender?

Abstract

This article analyses the differences and similarities in a polymic between Y.Kozir (Chairman of the Expert Advisory Group of the RSA) and Prof. Panferov which entertained and amused the national business valuation community throughout March and April 2008 and issued in many public letters and refutations on each side aired on the appraiser.ru website. The dispute centered on the hot button issue whether the discount rate risk premia should include additional inflationary adjusters over and above those implicitly found in riskless rate, so as not to double-count or omit some inflationary impacts.

The contention is made that such hair-spliting does not scrape, nor is producive of resolution to an underlying true paradox: whether it is truer to live to treat of the world with real (netted of inflation) parameters? Whether we would not be lost in a maze of double translation from the nominal to real world and back - such that any forecasting inconsistencies compound two-fold. And what is the worth of such arguement with respect to a single or homogenous period model such as CAPM around with the dispute has been partially revolving.

Note: downloadable document is in Russian.

Keywords: CAPM, risk premia, real discount rate, inflationary adjustments, Fisher real interest rate approach

JEL Classification: G12