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This paper contrasts the valuation of accounting numbers related to two classes of assets - the internally managed, fully-controlled assets versus the "significant influence" investments, that is, investments where the investing firm exercises influence, but not control, over the assets. We find...
Persistent link: https://www.econbiz.de/10014027787
Equilibrium asset-pricing models with time-varying expected economic growth have been criticized for their apparent inability to generate an upward-sloping yield curve and downward-sloping term structures of equity risk and risk premium. We theoretically investigate the model-implied equilibrium...
Persistent link: https://www.econbiz.de/10012835344
I propose a consumption-based asset pricing model that jointly explains the high equity premium, the counter-cyclical behaviour of stock returns, the upward sloping term structure of interest rates and the downward sloping term structure of equity. The driving forces behind these results are...
Persistent link: https://www.econbiz.de/10013057031
that a value premium arises, as value stocks have higher idiosyncratic cash-flow volatilities, lower average cash flows …
Persistent link: https://www.econbiz.de/10013019887
minus overvalued) but is not significant in cheap junk minus expensive quality stocks. If cash-flow beta is the source of … the value premium, we would expect a larger cash-flow beta difference between the cheap quality and expensive junk … that the cash flow beta may only spuriously explain the value premium. Or, at least, the cash-flow risk premium estimated …
Persistent link: https://www.econbiz.de/10012911648
Using survey forecasts, we find that systematic errors in expectations of long-term inflation and short-term nominal earnings growth are the main driver of prices and return puzzles for bonds and stocks. We demonstrate this by deriving and testing a single necessary and sufficient condition...
Persistent link: https://www.econbiz.de/10013222433
firms have lower cash-flow beta and higher discount-rate beta than firms with high leverage. Although cash-flow beta …
Persistent link: https://www.econbiz.de/10013139915
Realized returns comprise (ex-ante) expected returns plus (ex-post) innovations, and consequently both expected returns and returns innovations can be broken down into components reflecting fluctuations in cash flow (CF) and discount rate (DR). I use a present-value model to identify the CF and...
Persistent link: https://www.econbiz.de/10013061865
This paper decomposes the overall market beta of common stocks into four parts reflecting uncertainty related to the long-run dynamics of stock-specific and market-wide cash flows and discount rates. We employ a discrete time version of Merton's intertemporal capital asset pricing model to test...
Persistent link: https://www.econbiz.de/10014236926
Investment professionals, particularly financial analysts or security analysts evaluate securities and try to determine characteristics of securities and to identify mispriced securities. For that purpose they use different models to estimate the intrinsic value of the common stocks. Traditional...
Persistent link: https://www.econbiz.de/10009787042