Assessing alternative proxies for the expected risk premium

• 成果类型: Article
• 署名作者: Botosan, CA; Plumlee, MA
• 署名单位: Utah System of Higher Education; University of Utah
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2005.80.1.21
• 发表日期: 2005
• 页码: 21-53
• 关键词: cross-section; DISCLOSURE LEVEL; stock returns; cost; valuation

摘要

Managers, investors, and researchers have a compelling interest in identifying a reliable empirical proxy for firm-specific cost of equity capital (r). In theory, deducing r is possible if the market's future cash flow forecast and current stock price are observable. Practically, deducing r is dependent on the ability to estimate the market's forecasted terminal value. We evaluate five methods of deducing firm-specific r (labeled r(DIVPREM), r(GLSPREM), r(GORPREM), r(OJNPREM), and r(PEGPREM)) that deal with this conundrum differently. The extent to which the estimates are associated with firm risk in a stable and meaningful manner is the basis for our assessment. We find that the r(DIVPREM) and rPEGPREM estimates are consistently and predictably related to risk, while the alternatives are not. Based on these results, we conclude that r(DIVPREM) and r(PEGPREM) dominate the alternatives.