What M-Squared does is it "allows investors to analyze a bunch of
disparate as if they had all shown the same volatility. It does that by
hypothetically blending shares of a volatile fund with cash" to match
the "S&P 500's volatility."
Now I have always been suspicious about many of the various methods of
finding risk-adjusted discount rates. I prefer observable rates. This
strikes me as being different in that the formula for determining this
seems explicit (I did not check any references, I just read the WSJ
article.), and the components are observable.
I would like to hear what others think of this approach. Would this
approach be superior to the various risk adjustments that we all know
and (perhaps) love?
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