@article {Smith61, author = {Gary Smith and Albert Xu}, title = {Stocks Should Be Valued with a Term Structure of Required Returns}, volume = {26}, number = {2}, pages = {61--68}, year = {2017}, doi = {10.3905/joi.2017.26.2.061}, publisher = {Institutional Investor Journals Umbrella}, abstract = {In theory, the intrinsic value of a stock is determined by discounting the projected cash flow by a term structure of time-varying required returns. In practice, investors typically use a single discount rate, often a Treasury rate plus a risk premium. A single discount rate is a noisy proxy for the full term structure and can cause large valuation errors. If a single discount rate is used, the yield to perpetuity recommended by John Burr Williams is likely to be a better approximation to a complete term structure than are short-term rates.TOPICS: Fundamental equity analysis, portfolio theory}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/26/2/61}, eprint = {https://joi.pm-research.com/content/26/2/61.full.pdf}, journal = {The Journal of Investing} }