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How to Discount Cashflows with Time-Varying Expected Returns

Ang, Andrew - 2003

While many studies document that the market risk premium is predictable and that betas are not constant, the dividend discount model ignores time-varying risk premiums and betas. We develop a model to consistently value cashflows with changing risk-free rates, predictable risk premiums and...

Persistent link: https://www.econbiz.de/10012468652

Cash Flow Duration and the Term Structure of Equity Returns

Weber, Michael - 2016

The term structure of equity returns is downward-sloping: stocks with high cash flow duration earn 1.10% per month lower returns than short-duration stocks in the cross section. I create a measure of cash flow duration at the firm level using balance sheet data to show this novel fact. Factor...

Persistent link: https://www.econbiz.de/10012456159

The Time Series of the Cross Section of Asset Prices

Menzly, Lior - 2002

In this paper we propose a general equilibrium model that successfully reproduces the historical experience of the cross section of US stock prices as well as the realized history of the market portfolio. The model achieves this while addressing traditional concerns in the asset pricing...

Persistent link: https://www.econbiz.de/10012469492

What Drives Firm-Level Stock Returns?

Vuolteenaho, Tuomo - 2001

I use a vector autoregressive model (VAR) to decompose an individual firm's stock return into two components: changes in cash-flow expectations (i.e., cash-flow news) and changes in discount rates (i.e., expected-return news). The VAR yields three main results. First, firm-level stock returns...

Persistent link: https://www.econbiz.de/10012470484

Calculating the Present Value of An Asset's Future Cash Flows

Nadauld, Stephen D. - 1978

This paper describes both the theory and a computer program designed to calculate the present value of an asset …

Persistent link: https://www.econbiz.de/10012478881

The Valuation of Cash Flow Forecasts : An Empirical Analysis

Kaplan, Steven N. - 1994

This paper compares the market value of highly leveraged transactions (HLTs) to the discounted value of their corresponding cash flow forecasts. These forecasts are provided by management to investors and shareholders in 51 HLTs completed between 1983 and 1989. Our estimates of discounted cash...

Persistent link: https://www.econbiz.de/10012474204

Buyout Activity : The Impact of Aggregate Discount Rates

Haddad, Valentin - 2016

Buyout booms form in response to declines in the aggregate risk premium. We document that the equity risk premium is the primary determinant of buyout activity rather than credit-specific conditions. We articulate a simple explanation for this phenomenon: a low risk premium increases the present...

Persistent link: https://www.econbiz.de/10012456263

Corporate Valuation : An Empirical Comparison of Discounting Methods

Hommel, Nicolas; Landier, Augustin; Thesmar, David - National Bureau of Economic Research - 2023

, we ask what is, empirically, the best discounting method. To do this, we study listed firms, whose actual prices and … expected cash flows can be observed. We compare different discounting approaches on their ability to predict actual market … prices. We find that discounting based on expected returns (such as variants on the CAPM or multi-factor model), performs …

Persistent link: https://www.econbiz.de/10013537790

Why is Long-Horizon Equity Less Risky? A Duration-Based Explanation of the Value Premium

Lettau, Martin - 2005

This paper proposes a dynamic risk-based model that captures the high expected returns on value stocks relative to growth stocks, and the failure of the capital asset pricing model to explain these expected returns. To model the difference between value and growth stocks, we introduce a...

Persistent link: https://www.econbiz.de/10012467541

Measuring U.S. Fiscal Capacity using Discounted Cash Flow Analysis

Jiang, Zhengyang; Lustig, Hanno; Nieuwerburgh, Stijn van; … - National Bureau of Economic Research - 2022

We use discounted cash flow analysis to measure a country's fiscal capacity. Crucially, the discount rate applied to projected cash flows includes a GDP risk premium. We apply our valuation method to the CBO's projections for the U.S. federal government's deficit between 2022 and 2051 and debt...

Persistent link: https://www.econbiz.de/10013190996