2017 Discount for Lack of Marketability Study - Updated Report Now Available - This study provides objective rate of return measures for implementing the Johnson/Park Empirical Method for determining a discount for lack of marketability for the valuation of interests in privately held corporations and partnerships. Practitioners often apply a fixed discount for lack of marketability without regard to the resulting effect on the rate of return. This practice is inconsistent with the fundamental concept of valuation which equates risk and reward. To determine the size of the discount, three studies were conducted to measure the increase in return required to compensate investors that hold nonmarketable versus marketable securities or investments with longer term risk horizons. The report includes the following sections:
- Discussion of DLOM and Rates of Returns
- Study 1 - Private Equity vs. Public Equity Returns
- Study 2 - Restricted Stock Returns
- Study 3 - Long Term vs. Short Term Bond Horizons
This data was the basis for BVR's recent webinar, "Using the Empirical Method for Determining DLOMs" and has been presented at the AICPA, NACVA and ASA
Business Valuation conferences. The report will be emailed in a PDF document upon purchase and includes an example to demonstrate how to apply the study.
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