Valuation and Long-Term Growth Expectations

Angel Tengulov, Josef Zechner and Jeffrey Zwiebel

Journal of Financial and Quantitative Analysis, 2025, vol. 60, issue 5, 2121-2158

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 determining this long-term growth rate. This article takes a step in addressing this gap: we estimate the relationship 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.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:60:y:2025:i:5:p:2121-2158_2

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