TY  - JOUR
AU  - Lamont,Owen
AU  - Polk,Christopher
TI  - The Diversification Discount: Cash Flows vs. Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7396
PY  - 1999
Y2  - October 1999
UR  - http://www.nber.org/papers/w7396
L1  - http://www.nber.org/papers/w7396.pdf
N1  - Author contact info:
Owen Lamont
Department of Economics
Harvard University
Cambridge MA 02138
E-Mail: owen.lamont@yale.edu

Christopher Polk
Department of Finance
London School of Economics
Houghton St.
London WC2A 2AE
UK
Tel: +44 (0)20 7849 4917
Fax: +44 (0)20 7852 3580
E-Mail: c.polk@lse.ac.uk
AB  - Diversified firms have different values than comparable portfolios of single-segment firms.  These value differences must be due to differences in either future cash flows or future returns.  Expected security returns on diversified firms vary systematically with relative value.  Discount firms have significantly higher subsequent returns than premium firms. Slightly more than half of the cross-sectional variation in excess values is due to variation in expected future cash flows, with the remainder due to variation in expected future returns and to covariation between cash flow and returns.
ER  -