A risk-adequate valuation of Brazilian companies using the example of Arezzo Indústria e Comércio S.A

Ralf Peter Wüstermann ()
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Ralf Peter Wüstermann: PhD.-Student an der Girne American University

Zeitschrift für interdisziplinäre ökonomische Forschung, 2015, issue 2, 30-39

Abstract: Whether and to what extent an investor conducts a direct investment depends inter alia on how much the investor assesses the risk of a direct investment. This article examines the risk-adequate valuation of foreign equity investments. Foreign equity investments can be calculat-ed with an investment calculating procedure; however, the final decision regarding the foreign shareholding depends on the investor’s subjective risk assessment. This subjective risk as-sessment may lead to a determination that the investment risk is overvalued or undervalued. Therefore, it is possible that the investor loses opportunities or mistakenly invests. Hence, we will present different objectives and risk-adequate methods to value companies. The risk as-sessment can be performed using previously existing credit rating agencies and insurance company risk assessments, or it can be performed using the theory of international parity rela-tions. This new method is used to evaluate foreign companies. Also it is possible to simulate changes in a foreign equity investment over a long period and using scenarios. This will be performed using the fashion group Arezzo Indústria e Comércio SA in Brazil as the example. The acquired knowledge allows the investor to make an objective and risk-adequate assess-ment of foreign equity investments.

Keywords: Risk; Brazilian companies; valuation; investment; risk-adequate valuation (search for similar items in EconPapers)
JEL-codes: F20 F23 F30 F33 F36 F60 F61 F63 G17 G30 G34 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ris:zfioef:0052

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