%0 Journal Article %A Gary Smith %A Albert Xu %T Stocks Should Be Valued with a Term Structure of Required Returns %D 2017 %R 10.3905/joi.2017.26.2.061 %J The Journal of Investing %P 61-68 %V 26 %N 2 %X 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 %U https://joi.pm-research.com/content/iijinvest/26/2/61.full.pdf