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Costs of Equity Capital and Model Mispricing

Pastor, Lubos - 1998

Costs of equity for individual firms are estimated in a Bayesian framework using several factor-based pricing models. Substantial prior uncertainty about mispricing often produces an estimated cost of equity close to that obtained with mispricing precluded, even for a stock whose average return...

Persistent link: https://www.econbiz.de/10012472312

Consumption Risk and the Cost of Equity Capital

Jagannathan, Ravi - 2005

We demonstrate, using data for the period 1954-2003, that differences in exposure to consumption risk explains cross sectional differences in average excess returns (cost of equity capital) across the 25 benchmark equity portfolios constructed by Fama and French (1993). We use yearly returns on...

Persistent link: https://www.econbiz.de/10012467661

Cross-Border Valuation : The International Cost of Equity Capital

Bodnar, Gordon M. - 2003

How does a firm in one country evaluate an investment in a firm in another country, or how does it evaluate a foreign project that the firm itself is undertaking? The firm must estimate future free cash flows just as in a domestic project, but choosing an appropriate discount rate is a...

Persistent link: https://www.econbiz.de/10012468579

CAPM for Estimating the Cost of Equity Capital : Interpreting the Empirical Evidence

Da, Zhi - 2009

We argue that the empirical evidence against the Capital Asset Pricing Model (CAPM) based on stock returns does not … returns on stocks need not satisfy the CAPM even when expected returns of projects do. We provide empirical support for our … arguments by developing a method for estimating firms' project CAPM-betas and project returns. Our findings justify the …

Persistent link: https://www.econbiz.de/10012463759

Foreign Speculators and Emerging Equity Markets

Bekaert, Geert - 1997

A number of countries have delayed the opening of their capital markets to international" investment because of reservations about the impact of foreign speculators on both expected" returns and market volatility. We propose a cross-sectional time-series model that attempts to" assess the impact...

Persistent link: https://www.econbiz.de/10012472501

Equity is Cheap for Large Financial Institutions : The International Evidence

Gandhi, Priyank - 2016

In most countries, equity is a cheap source of funding for a country's largest financial institutions. On average, the stocks of the top 10% financial companies in a country account for over a quarter of total market capitalization, but these stocks earn returns that are significantly lower than...

Persistent link: https://www.econbiz.de/10012456321

External Equity Financing Shocks, Financial Flows, and Asset Prices

Belo, Frederico - 2014

less risky in equilibrium. The model also replicates the failure of the unconditional CAPM in pricing the cross section of …

Persistent link: https://www.econbiz.de/10012458455

Does Financial Constraint Affect Shareholder Taxes and the Cost of Equity Capital?

Chen, Chongyang - 2011

We show that firms with the least elastic demand for equity capital should benefit the most from reductions in shareholder taxes. Consistent with this prediction, we find that, following 1997 and 2003 cuts in U.S. individual shareholder taxes, financially constrained firms, and particularly...

Persistent link: https://www.econbiz.de/10012461488

Optimal Market Timing

Li, Erica X. N. - 2006

We use a fully-specified neoclassical model augmented with costly external equity as a laboratory to study the relations between stock returns and equity financing decisions. Simulations show that the model can simultaneously and in many cases quantitatively reproduce: procyclical equity issuance;...

Persistent link: https://www.econbiz.de/10012466657

Estimating the Intertemporal Risk-Return Tradeoff Using the Implied Cost of Capital

Pastor, Lubos - 2006

We reexamine the time-series relation between the conditional mean and variance of stock market returns. To proxy for the conditional mean return, we use the implied cost of capital, computed using analyst forecasts. The usefulness of this proxy is shown in simulations. In empirical analysis, we...

Persistent link: https://www.econbiz.de/10012466730

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