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Accounting Based Risk Measurement : An Alternative to CAPM Derived Discount Factors

Toms, Steve - 2012

Discount factors have a long tradition of being computed using capital market inputs for the estimation of systematic risk. They are of increasing importance in financial accounting, including the valuation of goodwill and other intangibles. In view of the volatility of stock market returns and...

Persistent link: https://www.econbiz.de/10013105994

A Note on Discounting and Funding Value Adjustments for Derivatives

Han, Meng - 2015

In this paper, valuation of a derivative partially collateralized in a specific foreign currency defined in its credit … derivative consists of three components: the price of the perfectly collateralized derivative (a.k.a. price by collateral rate … discounting), the value adjustment due to different funding spreads between the payoff currency and the collateral currency, and …

Persistent link: https://www.econbiz.de/10013035938

Systematic mispricing in European equity prices?

Berneburg, Marian (contributor) - 2007

One empirical argument that has been around for some time and that clearly contra- dicts equity market efficiency is that market prices seem too volatile to be optimal estimates of the present value of future discounted cash flows. Based on this, it is deduced that systematic pricing errors...

Persistent link: https://www.econbiz.de/10003482498

Fractional cointegration and tests of present value models

Caporale, Guglielmo Maria; Gil-Alaña, Luis A. - 2000

This paper tests the validity of Present Value (PV) models of stock prices by employing a two-step strategy for testing the null hypothesis of no cointegration against alternatives which are fractionally cointegrated. Monte Carlo simulations are conducted to evaluate the power and size...

Persistent link: https://www.econbiz.de/10009582383

CAPM and DCF : Does SML Relationship Gives Cost of Equity? – Ex-Ante Stock Returns are Not Same as Implied Discount Rates

Murugesan, Narayanaswamy - 2013

When Capital Asset pricing Model (CAPM) is considered as valid asset pricing theory, Security Market Line (SML) is …

Persistent link: https://www.econbiz.de/10013081162

Can Stochastic Discount Factor Models Explain the Cross Section of Equity Returns?

Abhakorn, Pongrapeeporn - 2016

We propose a multivariate test based on no-arbitrage conditions under the stochastic discount factor approach, which compares cross-sectional variation in equity returns to the cross-sectional variation in their conditional covariance with the discount factors. Using the multivariate generalized...

Persistent link: https://www.econbiz.de/10013000288

Market-Wide Illiquidity and the Volatility of a Model-Free Stochastic Discount Factor

Abad, David - 2020

We show that illiquidity risk matters for asset pricing independently of the specific functional form of the liquidity-based asset pricing model. Employing a non-parametric model-free stochastic discount factor (SDF), estimated using different sets of portfolio returns coming from both the stock...

Persistent link: https://www.econbiz.de/10012833972

Coskewness Risk Decomposition, Covariation Risk, and Intertemporal Asset Pricing

Kalev, Petko S. - 2019

We develop an intertemporal asset pricing model where cash flow news, discount rate news, and their second moments are priced by the market. This model generalizes the market return decomposition framework, showing that intertemporal considerations imply a decomposition of squared market returns...

Persistent link: https://www.econbiz.de/10012901111

Why Do Discount Rates Vary?

Kozak, Serhiy - 2019

The price of discount rate risk reveals whether increases in equity risk premia represent good or bad news to rational investors. Employing a new empirical methodology, we find that the price is negative, which suggests that discount rates are high during times of high marginal utility of...

Persistent link: https://www.econbiz.de/10012905667

The Factor Structure of Time-Varying Discount Rates

Atanasov, Victoria - 2017

Discount rate variation is driven by a short run business cycle component and a longer run trend component. This leads to state variable hedging of these two components and ICAPM logic implies a three factor model for expected returns. The factors represent cash ow news, short term discount rate...

Persistent link: https://www.econbiz.de/10012970569

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