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http://hdl.handle.net/11375/27252
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DC Field | Value | Language |
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dc.contributor.author | Wang, Qiao | - |
dc.contributor.author | Balvers, Ronald J. | - |
dc.contributor.author | Michael Lee-Chin & Family Institute for Strategic Business Studies | - |
dc.date.accessioned | 2022-01-03T20:17:18Z | - |
dc.date.available | 2022-01-03T20:17:18Z | - |
dc.date.issued | 2021-07 | - |
dc.identifier.uri | http://hdl.handle.net/11375/27252 | - |
dc.description | 52 p. ; Includes bibliographical references (pp. 45-49) ; This version: July 28, 2021. | en_US |
dc.description.abstract | We derive stock returns for firms producing nonrenewable commodities employing the investment-based asset pricing approach. By identifying the appropriate time-varying discount rate the investment-based approach allows an alternative test of the Hotelling Valuation Principle. The empirical results support the principle and enable predicting returns from sorting firms into quintiles by expected return, producing a 16-20 percent realized difference between top and bottom quintile. The return differences cannot be explained by standard risk factors or a commodity-specific factor, suggesting that an important risk factor is still missing from standard models. The approach permits cost-of-capital estimation that circumvents identifying systematic risk factors. Valuation Insight: The paper provides specific factors that determine the cost of capital of commodity-producing firms through the production-based asset pricing approach. This cost of capital measure may be applied to the discounted cashflows for valuation purposes, without risk factors needing to be specified. | en_US |
dc.language.iso | en | en_US |
dc.relation.ispartofseries | Michael Lee-Chin & Family Institute for Strategic Business Studies Working Paper;2021-03 | - |
dc.subject | Production-based asset pricing | en_US |
dc.subject | Commodity price risk | en_US |
dc.subject | Stock return predictability | en_US |
dc.subject | Hotelling valuation principle | en_US |
dc.subject | Commodity producers | en_US |
dc.subject | Nonrenewable resources | en_US |
dc.subject | Cost of capital determination | en_US |
dc.title | Determinants and predictability of commodity producer returns | en_US |
dc.type | Working Paper | en_US |
Appears in Collections: | Michael Lee-Chin & Family Institute for Strategic Business Studies Working Paper Series |
Files in This Item:
File | Description | Size | Format | |
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sbv_wp_2021-03.pdf | 837.25 kB | Adobe PDF | View/Open |
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