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Based on a survey of U.S. Chief Financial Officers (CFOs), we present expectations of the equity risk premium measured over a 10-year horizon relative to a 10-year U.S. Treasury bond. This multi-year survey has been conducted each quarter from June 2000 to June 2005. Each quarter the survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. The individual uncertainty is deduced from the 80 % confidence interval that each respondent provides for his or her risk premium assessment. We also present evidence on the determinants of the long-run risk premium. Our analysis suggests that there is a positive correlation between the ex ante risk premium and real interest rates as reflected in Treasury Inflation Indexed Notes.

We analyze the results of the most recent survey of U.S. Chief Financial Officers (CFOs) which looks ahead to the first quarter of 2007 and beyond. We present expectations of the equity risk premium measured over a 10-year horizon relative to a 10-year U.S. Treasury bond. This multi-year survey has been conducted every quarter from June 2000 to November 2006. Each quarter the survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. The individual uncertainty is deduced from the 80% confidence interval that each respondent provides for his or her risk premium assessment. We also present evidence on the determinants of the long-run risk premium. Our analysis suggests there is a positive correlation between the ex ante risk premium and real interest rates as reflected in Treasury Inflation Indexed Notes. The level of the risk premium also appears to track market volatility as reflected in the VIX index.

this report account for: distinguishes between options that address only one or two source, geologic, or hydrologic uncertainties and those that address most or all key uncertainties. . The sensitivity of the distance to the contaminant boundary as it relates to the impacted uncertainty. The analysis accounts for whether contaminant transport is believed to be very sensitive to the impacted uncertainties, or not very sensitive. However, due to the inability to obtain results for uncertainty reduction Measures 2 and 3, the incorporation of sensitivity information had to be performed under an assumption of linear model response (Measure 4). . The current level of information/understanding regarding the impacted uncertainties. The analysis accounts for whether the option is expected to add information to an area that is already relatively well understood or add information to an area about which very little is known. . The accuracy/reliability/sensitivities of activities. The analysis accounts for the estimated capabilities of the individual activities that make up the option; namely, their uncertainties, whether they tend to give biased estimates, and whether their accuracy varies depending on actual site conditions. . Informational interdependencies. The analysis accounts for the degree to which informational synergies may exist among the component activities of an option and whether the information that is collected is complementary or redundant. . Cost and cost interdependencies. The analysis accounts for the costs of conducting the activities that make up the subgroup and has the capability of accounting for cost savings or cost increases that may be expected due to economies of scale, synergisms or antagonisms over resource use, or other factors. In this case, the c...

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We analyze the results of a recent survey of U.S. Chief Financial Officers (CFOs) conducted in 2008. We present expectations of the equity risk premium measured over a 10-year horizon relative to a 10-year U.S. Treasury bond. This multi-year survey has been conducted every quarter from June 2000 to March 2008. Each quarter the survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. The individual uncertainty is deduced from the 80 % confidence interval that each respondent provides for his or her risk premium assessment. Using our time series of risk premia, we explore the link between these premia and real interest rates implied in Treasury Inflation Indexed Notes, stock market volatility represented by the VIX index, past stock market returns and equity valuation reflected in price to earnings ratios.

We analyze the history of the equity risk premium from surveys of U.S. Chief Financial Officers (CFOs) conducted every quarter from June 2000 to March 2009. The risk premium is the expected 10-year S&P 500 return relative to a 10year U.S. Treasury bond yield. The last two surveys were conducted during the darkest parts of a global financial crisis and our results show that the equity premium sharply increased during the crisis. The survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. The level of

This thesis aims to elucidate real option thinking and real option valuation techniques for innovative technology investment. Treating the fuel cell R&D investment as a real option for General Motor’s light passenger vehicle fleet, the thesis presents a 3-step approach to value the R&D and its influence on the fleet value, in which the uncertainties and managerial flexibility are proactively accounted for and evaluated. To comprehensively assess the investment, the thesis includes analyses and discussions on fuel cell technology, industry, and related public policies, as well as illustrations and comparisons of various project valuation techniques. It explains in detail the traditional capital budgeting technique, Discounted Cash Flow, and real option valuation techniques such as the finance-based methods and

Miscalibration is a form of overconfidence examined in both psychology and economics. Although it is often analyzed in lab experiments, there is scant evidence about the effects of miscalibration in practice. We test whether top corporate executives are miscalibrated, and study the determinants of their miscalibration. We study a unique panel of over 11,600 probability distributions provided by top financial executives and spanning nearly a decade of stock market expectations. Our results show that financial executives are severely miscalibrated: realized market returns are within the executives ’ 80 % confidence intervals only 33 % of the time. We show that miscalibration improves following poor market performance periods because forecasters extrapolate past returns when forming their lower forecast bound (“worst case scenario”), while they do not update the upper bound (“best case scenario”) as much. Finally, we link stock market miscalibration to miscalibration about own-firm project forecasts and increased corporate investment.

We analyze the history of the equity risk premium from surveys of U.S. Chief Financial Officers (CFOs) conducted every quarter from June 2000 to June 2010. The risk premium is the expected 10-year S&P 500 return relative to a 10year U.S. Treasury bond yield. While the risk premium sharply increased during the financial crisis peaking in February 2009, the current surveys show that the premium has returned to levels observed in late 2006 and early 2007. The survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. While disagreement has decreased from peak levels, the level of disagreement is still historically high suggesting considerable uncertainty. We also present evidence on the determinants of the long-run risk premium. Our analysis suggests the level of the risk premium closely tracks both market volatility (reflected in the VIX index) as well as credit spreads.