Valuation and Long-Term Growth Expectations

82 Pages Posted: 3 Dec 2019 Last revised: 3 Jun 2022

See all articles by Angel Tengulov

Angel Tengulov

University of Kansas - School of Business

Josef Zechner

Vienna University of Economics and Business

Jeffrey Zwiebel

Stanford Graduate School of Business

Date Written: November 18, 2019

Abstract

Long-term growth expectations are central to investment analysis and corporate valuation. Despite a dominant effect on firm value, the academic literature and practitioner conventions provide little guidance on how this long-term growth rate should be determined. This paper takes a step in addressing this gap: we estimate the relation between long-term growth and an extensive selection of firm, industry, and market characteristics. Market prices do not seem to fully capture long-term growth information. Cross-sectional tests yield substantial positive abnormal returns for firms with high expected long-term growth.

Keywords: Valuation, Terminal Value, Long-Term Growth Rates, Machine Learning, Market Efficiency

Suggested Citation

Tengulov, Angel and Zechner, Josef and Zwiebel, Jeffrey H., Valuation and Long-Term Growth Expectations (November 18, 2019). Available at SSRN: https://ssrn.com/abstract=3488902 or http://dx.doi.org/10.2139/ssrn.3488902

Angel Tengulov (Contact Author)

University of Kansas - School of Business ( email )

1654 Naismith Dr
Lawrence, KS 66045
United States

HOME PAGE: http://www.angeltengulov.com/

Josef Zechner

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien A-1019
Austria

Jeffrey H. Zwiebel

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-2917 (Phone)
650-725-7979 (Fax)

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