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.