Future Earnings Growth Volatility and the Value Premium
| dc.contributor.author | Alcock, Jamie | |
| dc.contributor.author | Steiner, Eva | |
| dc.contributor.author | Tan, Kelvin Jui Keng | |
| dc.date.accessioned | 2020-09-11T01:57:41Z | |
| dc.date.available | 2020-09-11T01:57:41Z | |
| dc.date.issued | 2011-12-01 | |
| dc.description.abstract | The value premium is well established in empirical asset pricing, but to date there is little understanding as to its fundamental drivers. We use a stochastic earnings valuation model to establish a direct link between the volatility of future earnings growth and firm value. We illustrate that risky earnings growth affects growth and value firms differently. We provide empirical evidence that the volatility of future earnings growth is a significant determinant of the value premium. Using data on individual firms and characteristic-sorted test portfolios, we also find that earnings growth volatility is significant in explaining the cross-sectional variation of stock returns. Our findings imply that the value premium is the rational consequence of accounting for risky earnings growth in the firm valuation process. | |
| dc.description.legacydownloads | Steiner19_Future_earning_growth.pdf: 311 downloads, before Aug. 1, 2020. | |
| dc.identifier.other | 9269056 | |
| dc.identifier.uri | https://hdl.handle.net/1813/71318 | |
| dc.language.iso | en_US | |
| dc.rights | Required Publisher Statement: Copyright held by the authors. | |
| dc.subject | asset pricing | |
| dc.subject | Fama-French factor model | |
| dc.title | Future Earnings Growth Volatility and the Value Premium | |
| dc.type | conference papers and proceedings | |
| local.authorAffiliation | Alcock, Jamie: University of Sydney | |
| local.authorAffiliation | Steiner, Eva: ems457@cornell.edu Cornell University School of Hotel Administration | |
| local.authorAffiliation | Tan, Kelvin Jui Keng: University of Queensland |
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