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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

The cash flow, return and risk characteristics of private equity

Ljungqvist, Alexander - 2003

Using a unique dataset of private equity funds over the last two decades, this paper analyzes the cash flow, return, and risk characteristics of private equity. We document the draw down and capital return schedules for the typical private equity fund, and show that it takes several years for...

Persistent link: https://www.econbiz.de/10012469249

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

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 are mainly driven by cash-flow news. For a typical stock, the … variance of cash-flow news is more than twice that of expected-return news. Second, shocks to expected returns and cash flows …

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

Risks for the Long Run : A Potential Resolution of Asset Pricing Puzzles

Bansal, Ravi - 2000

We model dividend and consumption growth rates as containing a small long-run predictable component and economic uncertainty (i.e., growth rate volatility) as being time-varying. The magnitudes of the predictable variation and changing volatility in growth rates, as in the data, are quite small....

Persistent link: https://www.econbiz.de/10012470673

Debt, Cash Flow and Inflation Incentives : A Swedish Example

Persson, Mats - 1996

The fiscal gains from, and hence the political incentives to, an increase in inflation rate of ten percentage points may be substantial: with Swedish data from 1994, these gains would have been an annual real flow of 3-4 percent of GDP, or a capitalized value of nearly 100 percent of GDP. They...

Persistent link: https://www.econbiz.de/10012473062

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

Investment, Finacial Factors and Cash Flow : Evidence From UK Panel Data

Devereux, Michael - 1989

In this paper we provide some econometric evidence on the impact of financial factors like cash flow, debt and stock measures of liquidity on the investment decisions of U. K. firms. These variables are introduced via an extension of the Q model of investment which explicitly includes...

Persistent link: https://www.econbiz.de/10012475929

Leverage Dynamics without Commitment

DeMarzo, Peter - 2016

In our model, leverage is dependent on the full history of the firm's earnings. Despite the absence of transactions costs, an increase in profitability causes leverage to decline in the short-run, but the rate of new debt issuance endogenously increases so that leverage ultimately mean-reverts....

Persistent link: https://www.econbiz.de/10012455881

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