Predicting market returns using aggregate implied cost of capital

• 成果类型: Article
• 署名作者: Li, Yan; Ng, David T.; Swaminathan, Bhaskaran
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University; Cornell University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.06.006
• 发表日期: 2013
• 页码: 419-436
• 关键词: Implied cost of capital; Market predictability; Valuation ratios

摘要

Theoretically, the implied cost of capital (ICC) is a good proxy for time-varying expected returns. We find that aggregate ICC strongly predicts future excess market returns at horizons ranging from one month to four years. This predictive power persists even in the presence of popular valuation ratios and business cycle variables, both in-sample and out-of-sample, and is robust to alternative implementations. We also find that ICCs of size and book-to-market portfolios predict corresponding portfolio returns. (C) 2013 Elsevier B.V. All rights reserved.