FBK Calculates Size Risk Premiums Based on Russian Stock Market Data

Data as at 30/06/2024

UPD: To calculate the premium, FBK's experts have analysed size risk premium data on the Russian stock market based on the market capitalisation analysis of Moscow Exchange listed companies. The current version of the study covers the period from the date of the first publication of market capitalisation data on the Exchange's website (30 December 2011) to 30 June 2024.

Data as at 31/12/2023

FBK's experts have analysed size risk premium data on the Russian stock market based on the market capitalisation analysis of Moscow Exchange listed companies. The study covers the period from the date of the first publication of market capitalisation data on the Exchange's website (30 December 2011) to 31 December 2023.

According to Alexander Matyushin, Head of the study and Associate Director of the Valuation Department at FBK, up to this date, the Russian valuation community has developed a practice of calculating the Risk Premium for investing in small companies on the basis of analysing US market statistics. In particular, one of the most popular studies is the Kroll Cost of Capital Navigator. At the same time, the available Russian statistics, both on the number of trading organisations and on the statistics observation time, makes it possible to calculate the Size Premium based on Moscow Exchange data.

According to Yulia Musnikova, Senior Manager of the Valuation Department at FBK, the benefits of this approach include the fact that it does not entail the use of auxiliary coefficients for the transition from the US market to the Russian market, and that the information published by the Moscow Exchange and used for the calculation is publicly available.

According to the study, the major companies have a size premium of -0.59%, mid-cap companies – of +0.68% (capitalisation up to RUB 2.4 trillion), small-cap companies – of +2.50% (capitalisation up to RUB 316 billion), and ultra-low-cap companies – of +3.45% (capitalisation up to RUB 39 billion).

This data will help Russian appraisers, M&A market specialists and investment project appraisers avoid using US market data to assess Russian companies and controversies when using auxiliary coefficients for transition from the US market to the Russian market. It should also be noted that the calculation methodology does not imply complex theoretical and practical research, which makes it open to general public enabling everyone to independently calculate up to quarterly Control Premiums (according to the periodicity of statistics published by the Moscow Exchange featuring capitalisation results).