In this paper we examine the impact of payout policy on cost of capital. Using forward-looking implied cost of capital as a measure of expected returns, we examine the cross-sectional relation between cost of capital and (a) the level of payout and (b) the distribution policy choice between...

We argue that the implied cost of capital (ICC), computed using earnings forecasts, is useful in capturing time variation in expected stock returns. First, we show theoretically that ICC is perfectly correlated with the conditional expected stock return under plausible conditions. Second, our...

A number of studies have found that on an average, mergers underperform in the long-run. More interestingly, studies have found substantial cross-sectional differences in the performance of the mergers in the long-run, and suggested that these differences reflect market inefficiency with respect...

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...

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...