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DeMarzo, Peter M. - 2016

voluntarily reduce debt. On the other hand, countervailing effects of asset growth and debt maturity cause leverage to mean … ultimately mean-reverts. The target level of leverage, and the speed of adjustment depends critically on debt maturity …; nonetheless, in equilibrium shareholders are indifferent toward the debt maturity structure …

Persistent link: https://www.econbiz.de/10012979368

Consumption Strikes Back? : Measuring Long-Run Risk

Hansen, Lars Peter - 2005

We characterize and measure a long-run risk return tradeoff for the valuation of financial cash flows that are exposed to fluctuations in macroeconomic growth. This tradeoff features components of financial cash flows that are only realized far into the future but are still reflected in current...

Persistent link: https://www.econbiz.de/10012784498

Cash Flow Multipliers and Optimal Investment Decisions

Kraft, Holger - 2010

By postulating a simple stochastic process for the firm's cash flows in which the drift and the variance of the process depend on the investment policy of the firm, we develop a theoretical model, determine the optimal investment policy and, given this policy, calculate the ratio of the current...

Persistent link: https://www.econbiz.de/10013146947

The Common Factor in Idiosyncratic Volatility : Quantitative Asset Pricing Implications

Herskovic, Bernard - 2014

We show that firms' idiosyncratic volatility obeys a strong factor structure and that shocks to the common factor in idiosyncratic volatility (CIV) are priced. Stocks in the lowest CIV-beta quintile earn average returns 5.4% per year higher than those in the highest quintile. The CIV factor...

Persistent link: https://www.econbiz.de/10013054863

Why is Long-Horizon Equity Less Risky? A Duration-Based Explanation of the Value Premium

Wachter, Jessica - 2005

to the CAPM …

Persistent link: https://www.econbiz.de/10012784914

Corporate Earnings and the Equity Premium

Longstaff, Francis A. - 2003

Corporate cash flows are highly volatile and strongly procyclical. We examine the asset-pricing implications of the sensitivity of corporate cash flows to economic shocks within a continuous-time model in which dividends are a stochastic fraction of aggregate consumption. We provide closed-form...

Persistent link: https://www.econbiz.de/10012786350

Cash-Flow Risk, Discount Risk, and the Value Premium

Santos, Tano - 2006

value premium is larger in %u201Cbad times,%u201D due to time variation in risk preferences; (c) the unconditional CAPM … rationalizes why the conditional CAPM and a Fama and French (1993) HML factor outperform the unconditional CAPM …

Persistent link: https://www.econbiz.de/10012783344

The Term Structures of Equity and Interest Rates

Lettau, Martin - 2010

This paper proposes a dynamic risk-based model capable of jointly explaining the term structure of interest rates, returns on the aggregate market and the risk and return characteristics of value and growth stocks. Both the term structure of interest rates and returns on value and growth stocks...

Persistent link: https://www.econbiz.de/10012757917

Durability of Output and Expected Stock Returns

Gomes, Joao F. - 2010

The demand for durable goods is more cyclical than that for nondurable goods and services. Consequently, the cash flows and stock returns of durable-good producers are exposed to higher systematic risk. Using the benchmark input-output accounts of the National Income and Product Accounts, we...

Persistent link: https://www.econbiz.de/10012760299

Investor Information, Long-Run Risk, and the Term Structure of Equity

Croce, Mariano (Max) Massimiliano - 2012

We study the role of information in asset pricing models with long-run cash flow risk. When investors can distinguish short- from long-run consumption risks (full information), the model generates a sizable equity risk premium only if the equity term structure slopes up, contrary to the data. In...

Persistent link: https://www.econbiz.de/10012755422