Is there an Equity Duration Premium?

  • Dominik Walter (Speaker)
  • Rüdiger Weber (Contributor)

Activity: Talk or presentation › Science to science

Description

Equity duration is a measure of discount-rate sensitivity that is driven by both,
stock-specific cash-flow timing and stock-specific discount-rate levels. Established measures of equity duration using market-price information derive their predictive power for returns from using market-implied discount rates. We introduce new measures of pure cash-flow timing which disentangle discount-rate level from cash-flow timing information. Our results indicate an unconditionally flat relationship between timing and average returns. However, it turns out that in recessions (expansion episodes), there is a negative (positive) relation between cash-flow timing and average stock returns.
Period16 Dec 2022
Event title35th Australasian Finance & Banking Conference
Event typeConference

Keywords

  • Equity duration, cash flow timing, term structure of equity, cross-section of expected returns

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