Long-Term Discount Rates Do Not Vary Across Firms

Matti Keloharju, Juhani T. Linnainmaa, Peter Nyberg

Research output: Contribution to journalArticleScientificpeer-review

1 Citation (Scopus)


Long-term expected returns do not appear to vary in the cross section of stocks. We show that even negligible persistent differences in expected returns, if they existed, would be easy to detect. Markers of such differences, however, are absent from actual stock returns. Our results are consistent with behavioral models and production-based asset pricing models in which firms’ risks change over time. Consistent with the lack of long-term differences in expected returns, persistent differences in firm characteristics do not predict the cross section of stock returns. Our results imply that stock market anomalies have only a limited effect on firm valuations.
Original languageEnglish
Pages (from-to)946-967
Number of pages22
JournalJournal of Financial Economics
Issue number3
Early online date4 May 2021
Publication statusPublished - Sep 2021
MoE publication typeA1 Journal article-refereed


  • Factors
  • Return predictability
  • Market efficiency
  • Production-based asset pricing models
  • Time-varying risks


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