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

This paper uses analysts' forecasts to estimate a share's equity duration, a measure of a company's average cash-flow maturity. We find that short duration equity 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 equity duration is a priced risk factor with similar properties as the Fama-French value 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

Implied cost of capital investment strategies - evidence from international stock markets

Investors can generate excess returns by implementing trading strategies based on publicly available equity analyst forecasts. This paper captures the information provided by analysts by the implied cost of capital (ICC), the internal rate of return that equates a firm's share price to the present value of analysts' earnings forecasts. We find that U.S. stocks with a high ICC outperform low ICC stocks on average by 6.0% per year. This spread is significant when controlling the investment returns for their risk exposure as proxied by standard pricing models. Further analysis across the world's largest equity markets validates these results