15 interestingly this compares to a vix level of 176

15
Interestingly, this compares to a VIX level of 17.6 on January 1, 2011, implying that
perceptions of risk are now relatively similar to those observed at the beginning of
2011 (see Graph 1).
16
As a reminder (see Table 1), the Duff & Phelps U.S.
recommended ERP was also 5.5% at the beginning of 2011.
11
“Overall, sales [in December 2011] rose 3.4 percent at the 22 retailers tracked by the Thomson Reuters
same-store sales index, compared with the 3.3 percent analyst forecast.” Source: Reuters, January 5,
2012. According to the U.S. Census Bureau, advance estimates of U.S. retail and food services sales for
December 2011 increased 0.1% relative to November 2011 and 6.5% versus December of 2010. Source:
12
Total nonfarm payroll employment increased by 200,000 in December. Source: U.S. Bureau of Labor
Statistics.
13
The 4-week average of initial jobless claims declined to 379,000 in mid-January 2012 from 418,000 in
late September 2011. Source: U.S. Department of Labor. Economists typically think of 400,000 as the
threshold above which the economy is contracting rather than expanding. See for example, Standard &
Poor’s “Global Credit Portal – RatingsDirect – Economic Research: U.S. Economic Forecast: U.S. Weekly
Financial Notes: Freaky Friday”, January 13, 2012
14
The U.S. unemployment rate declined to 8.5% in December 2011 from 9.0% in September 2011. U.S.
unemployment reached of high of 10.0% in October 2010 following the 2008−2009 Financial Crisis.
Source: U.S. Department of Labor.
15
The Chicago Board Options Exchange (CBOE) Volatility Index® (VIX®) is a key measure of market
expectations of near-term volatility conveyed by S&P 500 stock index option prices.
16
The VIX Index averaged 18.04 (daily) in the first six months of 2011. By January 13, 2012, the VIX Index
was at 20.91.

Duff & Phelps | Client Alert January 27, 2012 8
Graph 1: Chicago Board Options Exchange (CBOE) “VIX” Index
January 3, 2011 – January 13, 2012
Source: S&P Capital IQ
Default spreads can also be a useful indicator of markets’ perception of risk. For
example, in the summer of 2011, corporate spreads began to widen, peaking at the
end of September, reflecting the high volatility and level of uncertainty discussed
earlier (see Graph 2). Since then, however, these spreads have narrowed
significantly, down to 4.28% by mid-January 2012. Furthermore, b y mid-January,
the spread in U.S. corporate yields of high-yield over investment grade bonds was
not far from the level observed at the start of 2011 (3.51% at December 31,
2010) .
17
17
Source of underlying data: Federal Reserve Bank of St. Louis. U.S. investment grade corporate bonds
are represented by the BofA Merrill Lynch US Corporate Master Effective Yield series, and high yield U.S.
corporate bonds are represented by the BofA Merrill Lynch US High Yield Master II Effective Yield series.
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12
VIX Index
VIX Index (daily avg.) for
first6 months of 2011 (18.0)
September 30, 2011
43.0
August8,2011
48.0
January 13,2012
20.9

Duff & Phelps | Client Alert January 27, 2012 9
Graph 2: Spread of U.S. High Yield Corporate Bond Yields over U.S. Investment Grade
Corporate Bond Yields
January 3, 2011 – January 13, 2012
Source: FRED® Economic Data – Federal Reserve Bank of St. Louis
While investors' perceptions and attitudes towards risk seemed to have reversed in
the last couple of months, significant risks still remain. In the words of a recent S&P