Analysts' earnings forecast errors and cost of equity capital estimates

• 成果类型: Article
• 署名作者: Larocque, Stephannie
• 署名单位: University of Notre Dame
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-012-9207-6
• 发表日期: 2013
• 页码: 135-166
• 关键词: VARIANCE DECOMPOSITION; DISCLOSURE LEVEL; expected rate; IMPLIED COST; STOCK; returns; RISK; INFORMATION; decisions; MARKETS

摘要

This study investigates the relation between analysts' forecast errors and cost of equity capital estimates implied from analysts' earnings forecasts and price. My analysis predicts and removes forecast errors from analysts' earnings forecasts on an out-of-sample basis and then uses these adjusted analysts' forecasts to reverse-engineer cost of equity capital estimates. While the correction for predictable analysts' forecast errors meaningfully lowers each of three firm-level implied COEC estimates employed in this study and commonly used in the literature, I do not find that this correction improves their association with realized returns.