In a provocative article John Y. Campbell and Jianping Mei (1993) 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.
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Bradford Cornell (1999) studied this question.
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