European Capital Market Study

Munich (9 September 2020)

ValueTrust released the sixth edition of the European Capital Market Study (Version: June 30, 2020), which uniquely analyzes the relevant cost of capital parameters and multiples for the European capital market on an aggregated level.

As a result of the COVID-19 crisis, the risk-free rate fell almost continuously in the first half of 2020, reaching a historic low of 0.06% at the end of June. At the same time, the capital markets – despite a significant recovery since the beginning of the crisis – remain highly volatile, which leads to strong fluctuations of implicit cost of capital, the market risk premium and valuation levels.

The European Capital Market Study analyzes the relevant parameters to calculate the cost of capital with the Capital Asset Pricing Model (risk-free rate, market risk premium and beta). Additionally, ValueTrust determines implied as well as historical market and sector returns. Capital structure-adjusted implied sector returns serve as an indicator for the unlevered cost of equity for companies of the respective industries. The relevered cost of equity can be calculated by adapting the unlevered cost of equity to the company-specific debt situation. This method serves as an alternative to the CAPM. Trading multiples frame the end of this study.

ValueTrust examines the before mentioned parameters for the European capital market in form of the STOXX Europe 600. This index includes the countries Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland as well as the UK and has been subdivided into ten sector indices: Financials, Basic Materials, Consumer Cyclicals, Telecommunications Services, Industrials, Consumer Non-Cyclicals, Healthcare, Technology, Utilities and Energy.