How to discount cashflows with time-varying expected returns

• 成果类型: Article
• 署名作者: Ang, A; Liu, J
• 署名单位: Columbia University; National Bureau of Economic Research; University of California System; University of California Los Angeles
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2004.00715.x
• 发表日期: 2004
• 页码: 2745-2783
• 关键词: term structure; cross-section; stock returns; RISK; predictability; consumption; models

摘要

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 misvaluations, 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.