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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

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

Expected stock returns worldwide : a log-linear present-value approach

Chattopadhyay, Akash; Lyle, Matthew R.; Wang, Charley C. Y. - 2018

We provide the first large-scale study of the performance of expected-return proxies (ERPs) internationally. Analyst-forecast-based ICCs are sparsely populated and not robustly associated with future returns. Earnings-model-forecast-based ICCs are well-populated, but are unreliable outside the...

Persistent link: https://www.econbiz.de/10011931329

Is Flood Risk Priced in Bank Returns?

Schubert, Valentin - 2021

the highest financial damages. Using a comprehensive future flood risk measure matched to bank holding companies in the … smaller and less levered banks. Furthermore, I construct a flood risk factor from bank returns that cannot be entirely … explained by the conventional bank risk factors. And, I show that the flood risk factor can explain up to 30% of the variance of …

Persistent link: https://www.econbiz.de/10013211284

Noise and Deficiency of the Implied Cost of Capital as an Expected Return Proxy

Cheng, Agnes; Fang, Jing - 2022

Because stock price generally deviates from the intrinsic value, stock price is a noisy indicator of the intrinsic value. As an expected return proxy, the implied cost of capital (ICC)—the internal rate of return that equates the noisy stock price to discounted expected future dividends—thus...

Persistent link: https://www.econbiz.de/10014361606

The Leverage Anomaly in U.S. Bank Stock Returns

Venmans, Frank - 2020

The relationship between leverage and returns on US bank stocks between 1973 and 2019 is slightly hump-shaped, almost …-priced systematic risk and sensitivity to idiosyncratic volatility are prominent features of bank stock returns …

Persistent link: https://www.econbiz.de/10012852158

Cross-sectional returns predictability for emerging market banks : a study on Indian banking system

Mohapatra, Sabyasachi; Misra, Arun Kumar - In: Cogent economics & finance 7 (2019) 1, pp. 1-17

Using Indian bank-level data, we examine the cross-sectional returns predictability for banking stocks in view of the … model alongside bank-specific conditioning information in the form of asset quality variables, operational efficiency …

Persistent link: https://www.econbiz.de/10012023368

Would Stricter Capital Requirements Raise the Cost of Capital? Bank Capital Regulation and the Low Risk Anomaly

Baker, Malcolm P. - 2013

turn the rates available to borrowers. Standard theory predicts that, in perfect and efficient capital markets, reducing … per year. In competitive lending markets, a change of this magnitude would have doubled or tripled spreads, because bank …

Persistent link: https://www.econbiz.de/10013085095

CoCo-Induced Collapse and Bank Equity Returns

Allen, Linda; Golfari, Andrea; Won, Joonsung - 2023

Using equity returns on all banks (across 28 countries) that ever issued contingent convertiblecapital securities (CoCos), we identify a “CoCo-induced collapse option,” that apparently was exercised during the March 2023 failure of Credit Suisse. Reflecting this option’s value, abnormal...

Persistent link: https://www.econbiz.de/10014349796

CAPM and DCF : Does SML Relationship Gives Cost of Equity? – Ex-Ante Stock Returns are Not Same as Implied Discount Rates

Murugesan, Narayanaswamy - 2013

When Capital Asset pricing Model (CAPM) is considered as valid asset pricing theory, Security Market Line (SML) is …

Persistent link: https://www.econbiz.de/10013081162

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