A growing body of literature in accounting and finance relies on implied cost of equity (COE) measures. Such measures are sensitive to assumptions about terminal earnings growth rates. In this paper we develop a new COE measure that is more accurate than existing measures because it incorporates...

We investigate whether industry tax planning affects a firm's cost of capital by increasing its exposure to tax policy risk. We find evidence that equity returns increase with the propensity for tax planning in a firm's industry. Consistent with a policy risk interpretation, the magnitude of the...

We use returns of actively managed mutual funds to document the link between accrual quality (AQ) and systematic (priced) risk. Despite compelling theoretical arguments, prior research finds no evidence that poor AQ commands a risk premium in the cross-section of realized stock returns. We argue...

In this paper, we characterize the relative importance of two sources of fundamental market-wide news—large firms’ earnings announcements and macroeconomic releases. Our investigation is motivated by growing concerns in the financial community about the increasing impact of individual...