How to discount cashflows with time-varying expected returns:
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 condition...
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| Main Authors: | , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Cambridge, Mass.
National Bureau of Economic Research
2003
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| Series: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
10042 |
| Subjects: | |
| Online Access: | Volltext |
| Summary: | 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 conditional betas in the context of a conditional CAPM. Practical valuation is accomplished with an analytic term structure of discount rates, with different discount rates applied to expected cashflows at different horizons. Using constant discount rates can produce large mis-valuations, which, in portfolio data, are mostly driven at short horizons by market risk premiums and at long horizons by time-variation in risk-free rates and factor loadings. |
| Physical Description: | 42 S. graph. Darst. |
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| 490 | 1 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 10042 | |
| 520 | 3 | |a 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 conditional betas in the context of a conditional CAPM. Practical valuation is accomplished with an analytic term structure of discount rates, with different discount rates applied to expected cashflows at different horizons. Using constant discount rates can produce large mis-valuations, which, in portfolio data, are mostly driven at short horizons by market risk premiums and at long horizons by time-variation in risk-free rates and factor loadings. | |
| 650 | 4 | |a Cash Flow / Abzinsung / Kapitalertrag / Risikoprämie / Zinsstruktur / Theorie / USA | |
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| illustrated | Illustrated |
| index_date | 2024-07-02T22:41:26Z |
| indexdate | 2025-03-14T15:00:47Z |
| institution | BVB |
| language | English |
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| publishDate | 2003 |
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| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Ang, Andrew Verfasser (DE-588)124420907 aut How to discount cashflows with time-varying expected returns Andrew Ang ; Jun Liu Cambridge, Mass. National Bureau of Economic Research 2003 42 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 10042 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 conditional betas in the context of a conditional CAPM. Practical valuation is accomplished with an analytic term structure of discount rates, with different discount rates applied to expected cashflows at different horizons. Using constant discount rates can produce large mis-valuations, which, in portfolio data, are mostly driven at short horizons by market risk premiums and at long horizons by time-variation in risk-free rates and factor loadings. Cash Flow / Abzinsung / Kapitalertrag / Risikoprämie / Zinsstruktur / Theorie / USA Liu, Jun 1967- Verfasser (DE-588)128834811 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 10042 (DE-604)BV002801238 10042 http://papers.nber.org/papers/w10042.pdf kostenfrei Volltext |
| spellingShingle | Ang, Andrew Liu, Jun 1967- How to discount cashflows with time-varying expected returns National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Cash Flow / Abzinsung / Kapitalertrag / Risikoprämie / Zinsstruktur / Theorie / USA |
| title | How to discount cashflows with time-varying expected returns |
| title_auth | How to discount cashflows with time-varying expected returns |
| title_exact_search | How to discount cashflows with time-varying expected returns |
| title_exact_search_txtP | How to discount cashflows with time-varying expected returns |
| title_full | How to discount cashflows with time-varying expected returns Andrew Ang ; Jun Liu |
| title_fullStr | How to discount cashflows with time-varying expected returns Andrew Ang ; Jun Liu |
| title_full_unstemmed | How to discount cashflows with time-varying expected returns Andrew Ang ; Jun Liu |
| title_short | How to discount cashflows with time-varying expected returns |
| title_sort | how to discount cashflows with time varying expected returns |
| topic | Cash Flow / Abzinsung / Kapitalertrag / Risikoprämie / Zinsstruktur / Theorie / USA |
| topic_facet | Cash Flow / Abzinsung / Kapitalertrag / Risikoprämie / Zinsstruktur / Theorie / USA |
| url | http://papers.nber.org/papers/w10042.pdf |
| volume_link | (DE-604)BV002801238 |
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