Presidential Address: Discount Rates
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Abstract
ABSTRACT Discount‐rate variation is the central organizing question of current asset‐pricing research. I survey facts, theories, and applications. Previously, we thought returns were unpredictable, with variation in price‐dividend ratios due to variation in expected cashflows. Now it seems all price‐dividend variation corresponds to discount‐rate variation. We also thought that the cross‐section of expected returns came from the CAPM. Now we have a zoo of new factors. I categorize discount‐rate theories based on central ingredients and data sources. Incorporating discount‐rate variation affects finance applications, including portfolio theory, accounting, cost of capital, capital structure, compensation, and macroeconomics.
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The record
- Venue
- The Journal of Finance
- Topic
- Financial Markets and Investment Strategies
- Field
- Economics, Econometrics and Finance
- Canadian institutions
- Booth University College
- Funders
- —
- Keywords
- Capital asset pricing modelEconomicsVariation (astronomy)Financial economicsEconometricsPortfolioDividendCash flowModern portfolio theoryCapital budgetingMicroeconomicsFinance
- Has abstract in OpenAlex
- yes