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Illiquidity and the cost of equity capital : evidence from actual estimates of capital cost for U.S. data

Goyal, Amit; Subrahmanyam, Avanidhar; Swaminathan, Bhaskaran - 2021

Illiquidity measures appear to be related to monthly realized returns but do they impact long-run costs of capital (CoC) for firms? Using U.S. data, we find cross-sectional evidence that, controlling for market capitalization, the Amihud (2002) measure of illiquidity is negatively related to CoC...

Persistent link: https://www.econbiz.de/10012800436

Using the ICAPM to estimate the cost of capital of stock portfolios: empirical evidence on the Warsaw Stock Exchange

Urba´nski, Stanislaw; Leśkow, Jacek - In: Statistics in transition : an international journal of … 21 (2020) 1, pp. 73-94

apply the bootstrap method to evaluate the variability of their estimation method. The cost of capital they refer to is …

Persistent link: https://www.econbiz.de/10012183556

A look at the actual cost of capital of US firms

Moore, David J. - In: Cogent economics & finance 4 (2016) 1, pp. 1-15

The capital asset pricing model (CAPM) receives both criticism and widespread adoption by practitioners and academics … to address CAPM criticisms and provide new perspective on WACC estimates. The firm-based measure focuses on firm …-based WACC measures, along with the traditional CAPM-based WACC measure, to a broad sector-based cross section from 1972 to 2015 …

Persistent link: https://www.econbiz.de/10011597398

Do you really know your cost of capital?

Keloharju, Matti; Linnainmaa, Juhani; Nyberg, Peter - 2021

Conventional wisdom, reflected in firm, investment bank, and court practice and the way academics teach corporate finance, suggests that the equity cost of capital varies considerably across firms. This practice builds on a vast amount of evidence on expected rate of return differences between...

Persistent link: https://www.econbiz.de/10012816634

The cost of equity capital in stock portfolios listed on the warsaw stock exchange using the classic CAPM

Urba´nski, Stanislaw - In: E-Finanse : finansowy kwartalnik internetowy 15 (2019) 2, pp. 48-62

the Warsaw Stock Exchange in the years 1995-2017. To this end, the classic CAPM is used to estimate the cost of risk …. Model tests are based on 252 monthly returns. In order to assess the errors of cost of capital estimation, the bootstrap …

Persistent link: https://www.econbiz.de/10012104396

Implied Cost of Capital versus Fundamental Valuation Efficiency : A Clarification and Empirical Implications

Fang, Jing - 2019

As the proxy for expected return, the implied cost of capital (ICC) is subject to a mispricing-driven measurement error. For undervalued stocks, the mispricing-driven measurement error is positive and increases with the degree of undervaluation while for overvalued stocks, the mispricing-driven...

Persistent link: https://www.econbiz.de/10012859834

Speculative Stock Price and Inadequacy of the Implied Cost of Capital as a Proxy for Expected Return

Fong, Robert - 2020

The implied cost of capital (ICC), the internal rate of return that equates speculative stock price to discounted expected future dividends, includes a mispricing-driven component in addition to expected return. The estimated relation of a mispricing-associated factor (X) with ICC is thus a...

Persistent link: https://www.econbiz.de/10012839261

Implied Cost of Capital versus Fundamental Valuation Efficiency : A Clarification and Empirical Implications

Cheng, C.S. Agnes - 2019

As the proxy for expected return, the implied cost of capital (ICC) is subject to a mispricing-driven measurement error because the price of a stock used to compute ICC can deviate from its intrinsic value. For undervalued stocks, the mispricing-driven measurement error is positive and increases...

Persistent link: https://www.econbiz.de/10012901012

Cost of capital dynamics implied by firm fundamentals

Lyle, Matthew; Wang, Charles C. Y. - 2012

We provide a tractable model of firm-level expected holding period returns using two firm fundamentals ― book-to-market ratio and ROE ― and study the cross-sectional properties of the model-implied expected returns. We find that: 1) firm level expected returns and expected profitability are...

Persistent link: https://www.econbiz.de/10009678192

Income Smoothing, Information Uncertainty, Stock Returns, and Cost of Equity

Chen, Linda H. - 2018

This paper examines the effect of income smoothing on information uncertainty, stock returns, and cost of equity. I show that income smoothing through both total accruals and discretionary accruals tends to reduce firms' information uncertainty, as measured by stock return volatility, analyst...

Persistent link: https://www.econbiz.de/10012938674

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