We estimate risk-free value based on the residual income model, analysts' forecasts of earnings, and prevailing risk-free rates of return.

To measure the discount for risk implicit in share prices, we first compute risk-free value based on the residual income model using book values of equity, analysts' consensus expectations of future earnings, and prevailing risk-free rates of return.

We develop a new accounting-based measure of the effect of risk on share price, using the difference between observed share price and risk-free value, measured using the residual income model and risk-free rates of return.

b) We use the residual income model, risk-free rates of return, and Equation (2) to compute risk-free value.

7) Our proxies for risk-free rates of return are the yields on ten-year U.

Finally, due consideration should be afforded to rates of return prevailing in the market, including

risk-free rates of return, stock and money market conditions, and so on.

5 Observation of their autocorrelation functions indicated that both time series of real

risk-free rates of return were stationary.

Risk-free rates of return are calculated from a proxy for a riskless asset, such as U.

This disparity has confounded measurement of the relationship among timber, market, and risk-free rates of return.

To clarify the empirical implications of the two approaches to measuring the CAPM's explanatory variables, we used first and second calendar year market and risk-free rates of return to estimate the CAPM for rates of change in eleven of the series of annual-average sawtimber stumpage prices analyzed by Redmond and Cubbage (1988): bid prices for Douglas fir, western hemlock, ponderosa pine, southern pine, mixed hardwoods, maple, and oak sold from national forests (Ulrich 1987);(2) and prices for southern pine, ash, gum, and oak sold from private land in Louisiana (Ulrich 1987).

The different calendar years for measuring market and risk-free rates of return produced contrary estimates of the systematic risk of forest assets.

i,t + 1,j] with the righthand side of equation [8], we obtain: [13] [Mathematical Expression Omitted] Simplification and expression in CAPM risk premia form produces: [14] [Mathematical Expression Omitted] The CAPM thus specifies a relationship between the rate of change in the arithmetic mean of asset value and the weighted arithmetic mean of true market and risk-free rates of return, where the weights are the ratios [P.