We use earnings forecasts from a cross-sectional model to proxy for cash flow expectations and estimate the implied cost of capital (ICC) for a large sample of firms over 1968-2008. The earnings forecasts generated by the cross-sectional model are superior to analysts' forecasts in terms of...

We correlate analysts' forecast errors with temporal variation in investor sentiment. We find that when sentiment is high, analysts' forecasts of one-year-ahead earnings and long-term earnings growth are relatively more optimistic for “uncertain” or “difficult to value” firms. Adding...

In this paper, we examine international differences in the effect of management forecasts (which we use to proxy for voluntary disclosure) on the cost of equity capital (COC) across 31 countries. We find that the issuance of management forecasts is associated with a lower COC worldwide, but the...

Prior literature in accounting and financial economics measures asset growth as year-over-year growth in total assets. Such growth estimates are upward biased when firms engage in mergers and acquisitions. We decompose asset growth into merger-related and organic growth components, and find that...

Presentation Slides for "Overconfidence, Arbitrage, and Equilibrium Asset Pricing" This paper offers a model in which asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against mispricing. In equilibrium, expected returns are...

The basic paradigm of asset pricing is in vibrant flux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for...

The concept of bond duration was originally introduced by Macaulay (1938) and nowadays is well- established in the fixed-income literature. In this paper, I lift the same concepts from the fixed-income asset class and apply them to equities. I derive three candidate models for estimating the...

This study documents the prominent role of idiosyncratic risk in impeding arbitrage activities with regard to a new value-to-price anomaly. Adopting the theoretical foundation and empirical specification of Hwang and Sohn's (2010) real-option-based valuation model, we measure the intrinsic value...

Fundamental analysis involves the use of accounting data to predict future stock returns, future stock prices, or both. One aspect of such research is whether accounting information can be used to generate profitable portfolio strategies. Central to this style of fundamental analysis, is the...

This paper shows that in asset pricing the information environment gives rise to a systematic risk factor when the informativeness of future news events varies with their content (i.e., bad news and good news are not equally informative). The paper further shows that in such cases (cross) serial...