Author: Holger DaskePublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Evaluating Methods to Estimate the Implied Cost of Equity Capital: A Simulation Study
Author: Holger DaskeEvaluating and Improving Methods to Estimate the Implied Cost of Capital and Return Decompositions
Author: Jörn van HalterenEstimating Firms' Expected Cost of Equity Capital
Author: Jan A. KempkesEstimating the Cost of Capital Implied by Market Prices and Accounting Data
Author: Peter EastonPublisher: Now Publishers Inc
ISBN: 1601981945
Category : Business & Economics
Languages : en
Pages : 148
Book Description
Estimating the Cost of Capital Implied by Market Prices and Accounting Data focuses on estimating the expected rate of return implied by market prices, summary accounting numbers, and forecasts of earnings and dividends. Estimates of the expected rate of return, often used as proxies for the cost of capital, are obtained by inverting accounting-based valuation models. The author describes accounting-based valuation models and discusses how these models have been used, and how they may be used, to obtain estimates of the cost of capital. The practical appeal of accounting-based valuation models is that they focus on the two variables that are commonly at the heart of valuations carried out by equity analysts -- forecasts of earnings and forecasts of earnings growth. The question at the core of this monograph is -- How can these forecasts be used to obtain an estimate of the cost of capital? The author examines the empirical validity of the estimates based on these forecasts and explores ways to improve these estimates. In addition, this monograph details a method for isolating the effect of any factor of interest (such as cross-listing, fraud, disclosure quality, taxes, analyst following, accounting standards, etc.) on the cost of capital. If you are interested in understanding the academic literature on accounting-based estimates of expected rate of return this monograph is for you. Estimating the Cost of Capital Implied by Market Prices and Accounting Data provides a foundation for a deeper comprehension of this literature and will give a jump start to those who have an interest in these topics. The key ideas are introduced via examples based on actual forecasts, accounting information, and market prices for listed firms, and the numerical examples are based on sound algebraic relations.
Toward an Implied Cost of Capital
Author: William R. GebhardtPublisher:
ISBN:
Category :
Languages : en
Pages : 78
Book Description
In this study, we propose an alternative technique for estimating the cost of equity capital. Specifically, we use a discounted residual income model to generate a market implied cost-of-capital. We then examine firm characteristics that are systematically related to this estimate of cost-of-capital. We show that a firm's implied cost-of-capital is a function of its industry membership, B/M ratio, forecasted long-term growth rate, and the dispersion in analyst earnings forecasts. Together, these variables explain around 60% of the cross-sectional variation in future (two-year-ahead) implied costs-of-capital. The stability of these long-term relations suggests they can be exploited to estimate future costs-of-capital. We discuss the implications of these findings for capital budgeting, investment decisions, and valuation research.
The Implied Cost of Capital
Author: Carl BarkfeldtPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This study examines whether improvements in earnings forecasting translate into improvements in implied cost of capital estimates of expected returns. I attain high-performing earnings forecasting via a machine learning approach. In particular, I implement and evaluate six popular machine learning methods to forecast earnings based on a comprehensive set of predictor variables. The evaluation demonstrates that the non-linear machine learning methods - Gradient Boosted Regression Trees and Artificial Neural Network - can generate earnings forecasts for up to five years ahead that exhibit less bias and better accuracy than state-of-the-art panel-regression benchmarks as well as a random walk forecast. Moreover, I estimate the implied cost of capital on a sample of U.S. stocks spanning 2000-2017. The general result indicates that improvements in earnings forecasting do not translate into improvements in return predictability. While issues with the implied cost of capital methodology could explain the results, another possible explanation is market mispricing.
Cost of Capital
Author: Shannon P. PrattPublisher: John Wiley & Sons
ISBN: 1118852826
Category : Business & Economics
Languages : en
Pages : 1344
Book Description
A one-stop shop for background and current thinking on the development and uses of rates of return on capital Completely revised for this highly anticipated fifth edition, Cost of Capital contains expanded materials on estimating the basic building blocks of the cost of equity capital, the risk-free rate, and equity risk premium. There is also discussion of the volatility created by the financial crisis in 2008, the subsequent recession and uncertain recovery, and how those events have fundamentally changed how we need to interpret the inputs to the models we use to develop these estimates. The book includes new case studies providing comprehensive discussion of cost of capital estimates for valuing a business and damages calculations for small and medium-sized businesses, cross-referenced to the chapters covering the theory and data. Addresses equity risk premium and the risk-free rate, including the impact of Federal Reserve actions Explores how to use Morningstar's Ibbotson and Duff Phelps Risk Premium Report data Discusses the global cost of capital estimation, including a new size study of European countries Cost of Capital, Fifth Edition puts an emphasis on practical application. To that end, this updated edition provides readers with exclusive access to a companion website filled with supplementary materials, allowing you to continue to learn in a hands-on fashion long after closing the book.
Cost of Capital
Author: Shannon P. PrattPublisher: John Wiley & Sons
ISBN: 9780470223710
Category : Business & Economics
Languages : en
Pages : 448
Book Description
In this long-awaited Third Edition of Cost of Capital: Applications and Examples, renowned valuation experts and authors Shannon Pratt and Roger Grabowski address the most controversial issues and problems in estimating the cost of capital. This authoritative book makes a timely and significant contribution to the business valuation body of knowledge and is an essential part of the expert's library.
An Empirical Evaluation of the Cost and Equity Methods of Accounting for Long-term Investments in Common Stock
Author: Claud Dwayne DowellPublisher:
ISBN:
Category : Stocks
Languages : en
Pages : 266
Book Description
Estimating the Expected Cost of Equity Capital Using Analysts' Consensus Forecasts
Author: Holger DaskePublisher:
ISBN:
Category :
Languages : en
Pages : 36
Book Description
In this study, we develop a technique for estimating a firm's expected cost of equity capital derived from its stock price and analysts' consensus forecasts. Our estimation method based on the residual income valuation model builds on Gebhardt/Lee/Swaminathan (2001) and Easton/Taylor/ShroffSougiannis (2002), but extends and refines their approaches by explicitly allowing daily estimation and using only publicly available information at that estimation date. We apply this technique to estimate the expected cost of equity capital at the market, industry and individual firm level using historical German data from 1989-2002 and examine firm characteristics which have been systematically related to these estimated return expectations.