The Risk Premium Factor: A New Model for Understanding th... and over one million other books are available for Amazon Kindle. Learn more
Buy New
  • List Price: $85.00
  • Save: $27.26 (32%)
Only 2 left in stock (more on the way).
Ships from and sold by
Gift-wrap available.
Have one to sell? Sell on Amazon
Flip to back Flip to front
Listen Playing... Paused   You're listening to a sample of the Audible audio edition.
Learn more
See this image

The Risk Premium Factor, + Website: A New Model for Understanding the Volatile Forces that Drive Stock Prices Hardcover – October 4, 2011

See all 2 formats and editions Hide other formats and editions
Amazon Price New from Used from
"Please retry"
"Please retry"
$45.24 $45.24

Frequently Bought Together

The Risk Premium Factor, + Website: A New Model for Understanding the Volatile Forces that Drive Stock Prices + Rethinking the Equity Risk Premium
Price for both: $66.70

One of these items ships sooner than the other.

Buy the selected items together

Best Books of the Year
Best Books of 2014
Looking for something great to read? Browse our editors' picks for 2014's Best Books of the Year in fiction, nonfiction, mysteries, children's books, and much more.

Product Details

  • Hardcover: 182 pages
  • Publisher: Wiley; 1 edition (October 4, 2011)
  • Language: English
  • ISBN-10: 1118099052
  • ISBN-13: 978-1118099056
  • Product Dimensions: 6.2 x 0.7 x 9.3 inches
  • Shipping Weight: 15.2 ounces (View shipping rates and policies)
  • Average Customer Review: 4.5 out of 5 stars  See all reviews (2 customer reviews)
  • Amazon Best Sellers Rank: #1,533,244 in Books (See Top 100 in Books)

Editorial Reviews

From the Inside Flap

Knowing what to look for in the stock market can give you a competitive edge, but understanding the system itself—right down to the booms, busts, and bubbles of the past half-century—changes everything.

In The Risk Premium Factor: A New Model for Understanding the Volatile Forces That Drive Stock Prices, Stephen D. Hassett presents a radical new theory—the "factor" that explains theentire stock market, providing a definitive link between loss aversion theory, the equity risk premium, and stock price, and shows how you can make the most of the connection.

Where others have tried and failed to find a link between loss aversion and the processes that control how investors set prices in the stock market, The Risk Premium Factor succeeds. Demonstrating that the equity risk premium is proportional to long-term Treasury yields, the book establishes for the first time a quantitative connection between loss aversion and equity risk premium.

This remarkable new concept can be used to explain stock prices from 1960 through to the present day, including the 2008 financial meltdown, not through theories and simulations, but with historical data that bear out the truth. It shows how the S&P 500 has consistently reverted to predicted values and solves the equity premium puzzle by showing that it is consistent with findings on loss aversion. Putting you back in the driver's seat when it comes to investing, the book clearly demonstrates the stock market's reptilian-like response to three factors drive valuation and stock price: earnings, long-term growth, and interest rates. This book also includes a companion website with historical data, calculators, and links to additional apps and readings.

Dispelling the notions that the stock market is a mysterious arbiter of value, when, in fact, it is easy to understand the Risk Premium Factor Valuation Model is a game-changer for anyone who works in investments—from professional investors to corporate decision makers to private individuals. After all, if you don't understand how the market values businesses, you don't really understand the market at all.

From the Back Cover


"Stephen Hassett is onto something. His notion that the risk premium on stocks is not constant, but varies with the risk free rate, helps to explain an enduring puzzle: why actual stock prices vary from the estimates that analysts' models imply. This book will offer fresh and provocative insight to careful students of the stock market. Read it and grow wiser."—Robert F. Bruner, Dean and Charles C. Abbott Professor of Business Administration, Darden Graduate School of Business, University of Virginia

"The equity risk premium is a key input to the cost of capital. During periods of economic stability, practitioners typically used an estimate of the long-term average equity risk premium, typically adjusting the estimate once a year. But all that changed as the crisis in late 2008 unfolded. In these uncertain economic times, we have found the Risk Premium Factor Valuation Model to be a powerful tool for adjusting our equity risk premium estimate as we move through the rapidly changing business cycle. We recommend that practitioners use the Risk Premium Factor Valuation Model to better understand the economic interrelationships that drive the pricing of the broad stock market and the equity risk premium."—Roger J. Grabowski, Managing Director, Duff & Phelps LLC and coauthor of Cost of Capital: Applications and Examples

"Understanding and accurately estimating the cost of capital is fundamental to making decisions that create value. Stephen Hassett's Risk Premium Factor Valuation Model provides an easy-to-understand approach to estimating the cost of equity capital that is accessible and insightful to those with a basic understanding of finance and expert practitioners alike. Further, it demystifies the drivers of market valuation and provides a compelling and often under-appreciated linkage between growth and stock price. It will enrich the perspective of any investor or manager."—David M. Kostel, Managing Director and Co-Head of Healthcare Mergers & Acquisitions, Credit Suisse

More About the Author

Stephen D. Hassett is a corporate development executive with Sage North America, a subsidiary of The Sage Group plc, a leading global supplier of business management software and services.

He is the author of the "The Risk Premium Factor: A New Model for Understanding the Volatile Forces that Drive Stock Prices" (Wiley 2011) and has also published in the Journal of Applied Corporate Finance, Ad Age, and is a regular contributing author for the Seeking Alpha investment website.

He has written two companion apps for the Risk Premium Factor for iPhone ( and Android (

Previously, he was an executive at the Weather Channel, software entrepreneur and consultant with Stern Stewart & Co. He holds an MBA from the Darden School of Business at the University of Virginia and a B.S. from Rensselaer Polytechnic Institute.

More information available at

Customer Reviews

4.5 out of 5 stars
5 star
4 star
3 star
2 star
1 star
See both customer reviews
Share your thoughts with other customers

Most Helpful Customer Reviews

3 of 3 people found the following review helpful By nowen on October 15, 2011
Format: Hardcover Verified Purchase
Full disclosure: I am a friend of the author and have worked with him in the past. From that experience I know that Steve does his homework. He's been working on this concept for some time and I'm impressed with this book.

Cost of capital is perhaps the most important factor in value creation that is the least understood. A good model for analyzing cost of capital allows you to test all the assumptions in that model. This capability is crucial for investors and financial analysts. The RPF model allows you to ask good questions. Not "Are analysts' estimates too rosy?" but "Are analysts' estimate too rosy by 20%?" That is a very powerful difference.

The one weakness in the book I believe will be alleviated by future studies: what causes the RPF to shift? The author offers up some ideas, but I would like to see more in-depth analysis. However, the RPF seems to have shifted only twice in 50 years - making it a very stable.

I look forward to using the RPF model as part of my investment strategy going forward and I highly recommend this book.
1 Comment Was this review helpful to you? Yes No Sending feedback...
Thank you for your feedback. If this review is inappropriate, please let us know.
Sorry, we failed to record your vote. Please try again
0 of 1 people found the following review helpful By Hubert Marleau on August 8, 2014
Format: Hardcover Verified Purchase
Excellent book and imaginative and worthy of consideration
Comment Was this review helpful to you? Yes No Sending feedback...
Thank you for your feedback. If this review is inappropriate, please let us know.
Sorry, we failed to record your vote. Please try again

What Other Items Do Customers Buy After Viewing This Item?