Ben-David, Itzhak; Chinco, Alex - National Bureau of Economic Research - 2024
All of asset-pricing theory currently stems from one key assumption: price equals expected discounted payoff. And much … sense to put discount rates at the center of every asset-pricing model if market participants do not always use one. There ….We construct a new kind of asset-pricing model around this fact and show that it explains the market response to earnings surprises …