In this, my second post on 2020 data, I look at the price of risk, i.e., the premium that investors collectively demand for investing in risky assets. I start by looking at the price of risk in the bond market in the form of default spreads and compare where they stand today to history and to potential corporate defaults in the future. In the equity market, I compute historical premiums but argue for implied premiums, forward-looking and dynamic, and trace out its movement through 2020. I flip the framework to value the S&P 500 and while I find it over valued by about 12%, I welcome you to use the spreadsheet to make your own judgments.
Spreadsheet to value S&P 500: http://www.stern.nyu.edu/~adamodar/pc/blog/S&P500ValueJan1.xlsx
Blog Post: https://aswathdamodaran.blogspot.com/2021/01/data-update-2-for-2021-price-of-risk.html