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Estimating Firm-Specific Implied Risk Premium

Wang, Pengguo - 2017

This paper proposes a new approach to infer a firm-specific measure of the implied cost of capital. It incorporates endogenously estimated industry-year growth rate of the net present value of future investments. It requires only one-year-ahead forecasts of earnings, and dividend payout policy...

Persistent link: https://www.econbiz.de/10012972635

Off-Balance-Sheet Assets, Financial Leverage, and Expected Stock Returns

Zhang, Jasmine - 2020

This paper examines the cross-sectional relation between leverage and future stock returns. Prior research documents a puzzling negative correlation. We show that it is largely caused by firms' use of internal financing when having significant off-balance-sheet operating assets due to...

Persistent link: https://www.econbiz.de/10012853184

Default Risk Premium and Asset Prices

Corvino, Raffaele - 2020

This paper quantifies the premium demanded by the investors for bearing the corporate default risk. We propose a novel approach that exploits the information in both credit default swap (CDS) spreads and stock prices, using the pricing restrictions provided by a structural model of credit risk....

Persistent link: https://www.econbiz.de/10012856198

Choice Among Alternative Benchmarks : An Asset Pricing Approach

Brown, Stephen J. - 2014

This paper provides an asset pricing rationale for choosing among alternative ways to group securities in applied corporate finance settings. Explicit reference to the asset pricing paradigm has become less prevalent in the empirical corporate finance literature, where there has emerged a...

Persistent link: https://www.econbiz.de/10013055282

Liquidity, Distress Risk and Asset Pricing Implications

Zou, Qiqi - 2016

This paper aims to reconcile and shed new light on the “distress premium puzzle” by employing a carefully refined measure that captures company distress levels more accurately. It is found that liquidity, proxied by a trading noise parameter, can distort asset pricing results through...

Persistent link: https://www.econbiz.de/10012990993

Valuation Theory : Linearity, Discount Curves & Market Benchmarks

Rombolotti Axelrod, Alessio - 2014

In this paper I review the definition of weighted average cost of capital and derive the discount coefficient of the firm's cash flows which preserves linearity of the present value function within each discounting period, i.e. in each discounting period the sum of the present value of each cash...

Persistent link: https://www.econbiz.de/10013045433

(Presentation Slides) Investor Overconﬁdence, Covariance Risk, and Predictors of Securities Returns

Daniel, Kent D. - 2018

Presentation Slides for "Overconfidence, Arbitrage, and Equilibrium Asset Pricing" This paper offers a model in which asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against mispricing. In equilibrium, expected returns are...

Persistent link: https://www.econbiz.de/10012918741

Presentation Slides for 'Investor Psychology and Asset Pricing'

Hirshleifer, David A. - 2018

The basic paradigm of asset pricing is in vibrant flux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for...

Persistent link: https://www.econbiz.de/10012918745

International Cost of Capital Estimation : The No-Arbitrage Method

McLelland, Malcolm - 2018

This study summarizes problems associated with existing international cost of capital (ICC) estimation methods; adapts long-existing arbitrage pricing methods to ICC estimation to a setting where ICC is to be estimated for a privately-held asset not traded in the capital markets; and then...

Persistent link: https://www.econbiz.de/10012919805

CAPM Failure in Private Equity Valuation and the Alternative APT Method

McLelland, Malcolm - 2018

The existing criticisms of CAPM in the financial economics literature in combination with the lack of new generalized … article presents a simple test of CAPM using two publicly-traded securities suggesting that, while certain CAPM concepts are … relevant and useful in asset pricing, CAPM theory and related methods are generally inadequate in PCM valuation practice. Again …

Persistent link: https://www.econbiz.de/10012925608