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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

Capital Intensity and Investment Shocks : Implications for Stock Returns

Knesl, Jiri - 2019

I show that a firm's capital intensity affects the asset pricing implications of investment-specific technology shocks measured by a popular measure, the IMC porfolio. Capital-intensive stocks sorted by the exposure to this measure generate a highly significant average return premium of up to 5%...

Persistent link: https://www.econbiz.de/10014119859

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

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

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

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 as the weighted average cost of capital (WACC) equity component. This study introduces two new costs of equity measures to address CAPM criticisms and provide new perspective on...

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

The Cross Section of Long-Term Expected Returns

Lu, Zhongjin - 2020

Effective capital budgeting decisions require reliable estimates of long-term expected returns. I extract a predictor for long-term returns from the book-to-market ratio by controlling for its variation associated with long-term expected profitability. The resulting predictor reliably describes...

Persistent link: https://www.econbiz.de/10012855978

Wage Differentials, Firm Investment, and Stock Returns

Kim, Yongjun - 2018

This study investigates the effects of labor costs on firms' capital investments and stock returns. I estimate wage premia across U.S. industries and show that the negative investment-return relation implied by q-theory is steeper for firms paying high wage premia than for firms paying low wage...

Persistent link: https://www.econbiz.de/10012936438

Validating Implied Cost of Capital With Realized Returns by Using Alternative Measures of Cash-Flow News

Ketterer, Simeon; Dionysiou, Dionysia; Eierle, Brigitte; … - 2023

We outline analytically that when testing different implied cost of capital (ICC) measures for validation by employing the Vuolteenaho (2002) framework, the cash-flow news in the validation framework should be defined in a way that considers the model specific assumed sequence of future cash...

Persistent link: https://www.econbiz.de/10014349898