Aswath DamodaranCopy Anchor Link

Aswath DamodaranCopy Anchor Link

Aswath Damodaran is a finance professor at NYU's Stern School who has made his valuation teaching and research freely available online, and he is the principal voice of this corpus's scholarly valuation layer — the systematic counterpart to the investor letters. His corpus (691 research notes and papers here) spans dcf-valuation, equity-risk-premium, relative-valuation-multiples, and the accounting adjustments under accounting-quality.

His signature contribution is the insistence that valuation is a bridge between two languages. On one side are the numbers people, prone to "The illusion of precision"; on the other the story people, prone to fantasy. His resolution: "Every valuation starts with a narrative, a story that you see unfolding for your company in the future", and each narrative element must convert to a number. A good valuation, in his account, disciplines both sides at once.

His second signature move is the hard separation of value from price. He defines intrinsic valuation as value "a function of its fundamentals – cash flows, growth and risk", against pricing, which values assets "based upon how similar assets are currently priced". The two must not be confused, and his practical rule — do your job; if you are pricing, price, and if you are valuing, value — is that the tool must match the task.

That clarity makes him a useful critic of the tradition this wiki also documents. His Where is the 'value' in value investing? taxonomizes value investors into passive screeners, contrarians, and activists — and argues the Graham-school screeners put "an astonishing faith in accounting numbers and an equally stunning lack of faith in markets getting anything right." He is not hostile to value investing; he is hostile to its rituals, insisting that margin of safety augments rather than replaces a real risk assessment. See quality-vs-statistical-cheap.

Methodologically he is a rigorist about inputs. The equity-risk-premium must be estimated, not assumed — "the risk premium estimated in the US markets by different investment banks, consultants and corporations range from 4% at the lower end to 12% at the upper end" — and the answer should come from current prices, not stale history. Multiples must pass consistency, uniformity, and fundamentals tests. His work is thus the measuring discipline that the investor letters presuppose: where howard-marks argues risk is loss not volatility, and warren-buffett demands a margin of safety, Damodaran supplies the machinery for estimating the value that the margin is drawn against.

See alsoCopy Anchor Link

• bruce-greenwald
• how-damodaran-cross-checks-valuation

Investment philosophyCopy Anchor Link

The compiled, source-grounded version of his beliefs lives at investment philosophy.

SourcesCopy Anchor Link

• damodaran/markdown/narrative&numbers.md
• damodaran/markdown/valuation.md
• damodaran/markdown/valueversuspriceNew.md
• damodaran/markdown/OmahaValueInvesting.md
• damodaran/markdown/riskprem.md
• damodaran/markdown/multiples.md