Long-Term Discount Rates Do Not Vary Across Firms

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
Date
2021-09
Major/Subject
Mcode
Degree programme
Language
en
Pages
22
946-967
Series
Journal of Financial Economics, Volume 141, issue 3
Abstract
Long-term expected returns do not appear to vary in the cross section of stocks. We show that even negligible persistent differences in expected returns, if they existed, would be easy to detect. Markers of such differences, however, are absent from actual stock returns. Our results are consistent with behavioral models and production-based asset pricing models in which firms’ risks change over time. Consistent with the lack of long-term differences in expected returns, persistent differences in firm characteristics do not predict the cross section of stock returns. Our results imply that stock market anomalies have only a limited effect on firm valuations.
Description
Keywords
Factors, Return predictability, Market efficiency, Production-based asset pricing models, Time-varying risks
Other note
Citation
Keloharju, M, Linnainmaa, J T & Nyberg, P 2021, ' Long-Term Discount Rates Do Not Vary Across Firms ', Journal of Financial Economics, vol. 141, no. 3, pp. 946-967 . https://doi.org/10.1016/j.jfineco.2021.04.031