Risk, duration, and capital budgeting: New evidence on some old questions

In a provocative article Campbell and Mei suggest that systematic risk arises not because of correlation between a company's cash flow and the market return but primarily because of common variation in expected returns. If true, the Campbell-Mei hypothesis has important implications for capital budgeting, particularly at high-technology companies that have long duration, idiosyncratic investment projects. This article presents some new evidence related to the Campbell-Mei hypothesis and then evaluates the impact of the hypothesis with a case study of Amgen Corporation.