A New Measure of Equity Duration: The Duration-Based Explanation of the Value Premium Revisited

This paper proposes a new methodology to estimate a share's equity duration by using analysts'cash-flow forecasts.

Author(s) :

David SchroderBirkbeck

College, University of LondonResearch Associate, EDHEC-Risk Institute

Florian Esterer

Swisscanto Asset Management AG

Presentation :

We find that short duration is associated with high expected and realized returns —  which cannot be attributed to the shares' systematic risk exposure as implied by the market beta. Instead, we show that this measure of a company's average cash-flow maturity is a priced risk factor that has similar properties as the Fama-French factor B/M ratio. Our analysis suggests that the value premium might be a compensation for the value firms' higher exposure to cash-flow risk.
Pdf
A New Measure of Equity Duration: The Duration-Based Explanation of the Value Pr...
(1.06 MB)
Type : Working paper
Date : le 05/12/2011
Extra information : For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ]
Research Cluster : Finance

See Also

EDHEC consolidates its position as a world-leading school for business and entrepreneurship
- 03-07-2017
Founded by entrepreneurs, EDHEC has embraced the fundamental values of business for...
Station F successfully inaugurated in the presence of Emmanuel Macron and EDHEC
- 29-06-2017
EDHEC announced this May that it had joined Station F, the world’s biggest start-up...
- 22-06-2017
Peter Daly and Dennis Davy, professors at EDHEC Business School specialised in Language...
Financial Times ranking 2017: #1 Master in Finance Worldwide
- 19-06-2017
EDHEC Business School’s Master in Finance tops the Financial Times Masters in Finance...