The implied cost of capital: A new approach

• 成果类型: Article
• 署名作者: Hou, Kewei; van Dijk, Mathijs A.; Zhang, Yinglei
• 署名单位: University System of Ohio; Ohio State University; Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam; Chinese University of Hong Kong
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2011.12.001
• 发表日期: 2012
• 关键词: ANALYSTS EARNINGS FORECASTS; cross-section; Fundamental analysis; alternative proxies; DISCLOSURE LEVEL; expected rate; Firm risk; cash flow; equity; return

摘要

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 coverage, forecast bias, and earnings response coefficient. Moreover, the model-based ICC is a more reliable proxy for expected returns than the ICC based on analysts' forecasts. We present evidence on the cross-sectional relation between firm-level characteristics and ex ante expected returns using the model-based ICC. (c) 2011 Elsevier B.V. All rights reserved.