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Costs of Financial Distress, Delayed Calls of Convertible Bonds, and the Role of Investment Banks
Shleifer, Andrei - 2010
In a frictionless market with perfect information, a shareholder-wealth- maximizing firm should force conversion of its convertible bond issue into stock as soon as the bond comes in-the-money. Firms however appear to systematically delay forced conversion, sometimes for years, beyond this time....
Persistent link: https://www.econbiz.de/10012760209
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Globalization of Equity Markets and the Cost of Capital
Stulz, René M. - 2014
This paper examines the impact of globalization on the cost of equity capital. We argue that the cost of equity capital decreases because of globalization for two important reasons. First, the expected return that investors require to invest in equity to compensate them for the risk they bear...
Persistent link: https://www.econbiz.de/10013069163
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Do We Need CAPM for Capital Budgeting?
Meier, Iwan - 2003
A key input to the capital budgeting process is the cost of capital. Financial managers most often use the CAPM for … for the U.S. equity premium as the market risk premium. The CAPM as a model has been seriously challenged in the academic …
Persistent link: https://www.econbiz.de/10012786910
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CAPM for Estimating the Cost of Equity Capital : Interpreting the Empirical Evidence
Da, Zhi - 2010
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/10012757537
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Consumption Risk and the Cost of Equity Capital
Wang, Yong - 2010
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/10012762530
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Cross-Border Valuation : The International Cost of Equity Capital
Bodnar, Gordon M. - 2010
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/10012762708
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Costs of Equity Capital and Model Mispricing
Pastor, Lubos - 2010
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/10012763608
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Nonparametric Estimation of State-Price Densities Implicit in Financial Asset Prices
Ait-Sahalia, Yacine - 2010
Implicit in the prices of traded financial assets are Arrow- Debreu state prices or, in the continuous-state case, the state-price density (SPD). We construct an estimator for the SPD implicit in option prices and derive an asymptotic sampling theory for this estimator to gauge its accuracy. The...
Persistent link: https://www.econbiz.de/10012763707
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A Direct Approach to Arbitrage-Free Pricing of Credit Derivatives
Das, Sanjiv Ranjan - 2010
to compute more complicated derivative securities …
Persistent link: https://www.econbiz.de/10012763833
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Fiscal Discriminations in Three Wars
Hall, George J. - 2013
In 1790, a U.S. paper dollar was widely held in disrepute (something shoddy was not 'worth a Continental'). By 1879, a U.S. paper dollar had become 'as good as gold.' These outcomes emerged from how the U.S. federal government financed three wars: the American Revolution, the War of 1812, and...
Persistent link: https://www.econbiz.de/10013082431