We construct a cross-section of stock prices and their corresponding present values of future cash flows. A regression of present value on the initial stock price should have a slope coefficient equal to 1.0. For short horizons, this is a cross-section version of checking the random walk model...

Standard models of intertemporal utility maximization assume that agents discount future utility flows at a constant rate — exponential discounting. Euler equations estimated over different time horizons should have equal discount rates. They do not. Rising term yield premia imply discount...