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The Substitutability of Labor : Implications for the Cross-Section of Stock Returns

Shim, Kyung Hwan - 2016

We examine the cross-sectional relation between log growth in physical capital to log growth in labor and subsequent stock returns. The ratio is a strong predictor of negative future abnormal returns. This relation strengthens with measures of financing constraint while remaining robust to...

Persistent link: https://www.econbiz.de/10013006584

A corporate financing-based asset pricing model

Steri, Roberto - 2018

I show that an asset pricing model for the equity claims of a value-maximizing firm can be constructed from its optimal financial contracting behavior. I study a dynamic contracting model in which firms trade off the costs and benefits of a given promise to pay external lenders in a specific...

Persistent link: https://www.econbiz.de/10011900221

Properties of Implied Cost of Capital Using Analysts’ Forecasts

Guay, Wayne R. - 2012

We evaluate the influence of measurement error in analysts' forecasts on the accuracy of implied cost of capital estimates from various implementations of the ‘implied cost of capital' approach, and develop corrections for the measurement error. We document predictable error in the implied...

Persistent link: https://www.econbiz.de/10013114798

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 supposed to give ex-ante returns for the single period investment horizon. Since the required returns should be same as the cost of equity (discount rates) in efficient markets, SML...

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

Estimating the Cost of Equity : Why Do Simple Benchmarks Outperform Factor Models?

Kapadia, Nishad - 2014

We compare the accuracy of cost of equity estimates based on leading factor models to two simple alternatives: the asset mean and the market mean. The market mean proves to be a serious competitor to traditional implementations of factor models even if the underlying factor model is true....

Persistent link: https://www.econbiz.de/10013065759

Beta Estimation with Stock Return Outliers : The Case of U.S. Pharmaceutical Companies

Theodossiou, Alexandra K. - 2009

Efficient estimation of the equity cost of public corporations is an essential component of computing the required rate … verified on a sample of U.S. pharmaceutical companies by comparing the OLS estimation performance with that of our proposed … moderated but not eliminated by extending the estimation period. The latter finding suggests that a robust method like HRM is …

Persistent link: https://www.econbiz.de/10013159450

The Equity Premium in 150 Textbooks

Fernandez, Pablo - 2019

I review 150 textbooks on corporate finance and valuation published between 1979 and 2009 by authors such as Brealey, Myers, Copeland, Damodaran, Merton, Ross, Bruner, Bodie, Penman, Arzac… and find that their recommendations regarding the equity premium range from 3% to 10%, and that 51 books...

Persistent link: https://www.econbiz.de/10012906191

Survey: market risk premium and risk-free rate used for 81 countries in 2020

Fernández, Pablo; Apellániz, Eduardo de; Acín, Javier F. - 2020

This paper contains the statistics of a survey about the Risk-Free Rate (RF) and the Market Risk Premium (MRP) used in 2020 for 81 countries. We got answers for 87 countries, but we only report the results for 81 countries with more than 6 answers.Many respondents use for European countries a RF...

Persistent link: https://www.econbiz.de/10012704009

Expected Stock Returns and Firms’ Perceived Cost of Capital

Gormsen, Niels Joachim - 2021

Using data from a decade of surveys of corporate managers, I find evidence that firms with higher expected stock returns have a higher perceived cost of equity and use higher discount rates in capital budgeting. Variation in expected stock returns, as measured by exposure to equity risk factors,...

Persistent link: https://www.econbiz.de/10013244072

Customer-Supplier Interactions and Expected Returns

Bustamante, Maria Cecilia - 2021

Supply chain interactions are a critical aspect of any firm's competitive strategy, and involve both input price negotiations and complementary investment decisions. This paper provides a model of strategic investment that predicts how customers match with suppliers, and how the way in which...

Persistent link: https://www.econbiz.de/10013246350

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