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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/10011988697

On transaction-cost models in continuous-time markets

Poufinas, Thomas - In: International Journal of Financial Studies : open … 3 (2015) 2, pp. 102-135

Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs,...

Persistent link: https://www.econbiz.de/10011308467

The cost of capital of the financial sector

Adrian, Tobias; Friedman, Evan; Muir, Tyler - 2015

Standard factor pricing models do not capture well the common time-series or cross-sectional variation in average returns of financial stocks. We propose a five-factor asset pricing model that complements the standard Fama and French (1993) three-factor model with a financial sector ROE factor...

Persistent link: https://www.econbiz.de/10011410520

Capital Assets Pricing on KSE-Pakistan and Fundamental Values : An Analysis of FCF and EPS

Hanif, Muhammad - 2011

This study is conducted to test the impact of two fundamental values (FCF & EPS), depicted through financial reports, on security prices. Sample includes all nonfinancial firms listed in KSE-30 Index and covers 9 years period 2000-08. Valuation of securities done through discounting of free cash...

Persistent link: https://www.econbiz.de/10013133395

Three Discount Methods for Valuing Projects and the Required Return on Equity

Schauten, Marc - 2011

In this paper we discuss the required return on equity for a simple project with a finite life. To determine a project's cost of equity, it is quite common to use Modigliani and Miller's ‘Proposition II' (1963). However, if the assumptions of MM do not hold, ‘Proposition II' will lead to...

Persistent link: https://www.econbiz.de/10013133845

The Implied Cost of Capital : A New Approach

Hou, Kewei - 2011

We use earnings forecasts from a cross-sectional model to proxy for cash flow expectations and estimate the implied cost of capital (ICC) for a large sample of firms over 1968-2008. The earnings forecasts generated by the cross-sectional model are superior to analysts' forecasts in terms of...

Persistent link: https://www.econbiz.de/10013133861

Does Q-Theory with Investment Frictions Explain Anomalies in the Cross-Section of Returns?

Li, Dongmei - 2011

Q-theory predicts that investment frictions steepen the relation between expected returns and firm investment. Using financing constraints to proxy for investment frictions, we document only weak evidence that the investment-to-assets and asset growth effects in the cross-section of returns are...

Persistent link: https://www.econbiz.de/10013133882

A Structural Model of Debt Pricing with Creditor-Determined Liquidation

Bruche, Max - 2011

This paper develops a continuous time asset pricing model of debt and equity in a framework where equityholders decide when to default but creditors decide when to liquidate. This framework is relevant for environments where creditors exert a significant influence on the timing of liquidation,...

Persistent link: https://www.econbiz.de/10013134316

Corporate Derivatives Use and the Cost of Equity

Lin, Chen-Miao - 2010

We investigate the relation between derivatives use and corporations' cost of equity capital. Using a large sample of non-financial firms, we compute and analyze (i) the relative cost of equity of firms that use derivatives and those that do not; and (ii) the change in cost of equity experienced...

Persistent link: https://www.econbiz.de/10013137327

The Defeasance of Control Rights

Bienz, Carsten - 2010

We analyze one frequently used clause in public bonds called covenant defeasance. Covenant defeasance allows the bond issuer to remove all of the bond's covenants by placing the remaining outstanding payments with a trustee in an escrow account to be paid out on schedule. Bond covenants are...

Persistent link: https://www.econbiz.de/10013139456