Rüdiger Weber, Vienna University of Economics and Business & VGSF

The Fin­ance Brown Bag Sem­inar is held by the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance (WU Vi­enna) and the Vi­enna Gradu­ate School of Fin­ance (VGSF). It serves as a present­a­tion plat­form for PhD stu­dents, fac­ulty mem­bers, and vis­it­ors. An over­view of BBS on the web­site of the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance.

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Rüdi­ger Weber, Vi­enna Uni­versity of Eco­nom­ics and Busi­ness & VGSF

Equity Dur­a­tion, Cash-­flow Tim­ing and the Term Struc­ture of Equity (joint with Dominik Wal­ter)

We study the re­la­tion between equity dur­a­tion, cash-­flow tim­ing and stock re­turns. Es­tab­lished meas­ures of equity dur­a­tion mix up in­form­a­tion on the level of dis­count rates (ex­pec­ted re­turns) and the tim­ing of cash flows. Regard­less of the equity term struc­ture, dur­a­tion is a mono­ton­ic­ally de­creas­ing func­tion of each stock's true mar­ket dis­count rate. Hence, the re­la­tion between mean re­turns and em­pir­ical dur­a­tion meas­ures re­ly­ing on mar­ket-­price in­form­a­tion is mech­an­ic­ally neg­at­ive. We there­fore in­tro­duce new meas­ures of pure cash-­flow tim­ing and find an un­con­di­tion­ally flat re­la­tion between tim­ing and re­turns. In line with the qual­it­at­ive pre­dic­tions of stand­ard, con­sump­tion-­based as­set pri­cing it turns out that in re­ces­sions (ex­pan­sion epis­odes), there is a neg­at­ive (pos­it­ive) re­la­tion between cash-­flow tim­ing and aver­age stock re­turns.