Conference Time: 23rd May 2024, 07:18:23pm EDT
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Please note that all times are shown in the time zone of the conference. The current conference time is: 23rd May 2024, 07:18:23pm EDT
Track M8-1: Disagreement, beliefs and asset prices
Time:
Monday, 20/May/2024:
8:30am - 9:15am
Session Chair: Sean Myers , The Wharton SchoolDiscussant: Ricardo De la O , University of Southern California
Location: Room 619
Presentations
Dissecting Disagreement in Valuations: Inputs and Outcomes
Paul Decaire1 , Denis Sosyura1 , Michael Wittry2
1 Arizona State University; 2 Ohio State University
Using valuation models of financial analysts, we identify the drivers of disagreement
in stock valuation. Disagreement in the discount rate is as important in explaining
the variation in a stock’s intrinsic value as the disagreement in expected cash flows.
Analysts derive the discount rate by estimating the same return-generating model
(CAPM) but over different trailing horizons and under different assumptions about the
market risk premium. This approach produces large variation in betas and the discount
rate. These methodological choices are specific to the analyst rather than their firm.
Overall, we offer micro evidence on the inner workings of securities valuation.