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Estimating the intertemporal risk-return tradeoff using the implied cost of capital

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We argue that the implied cost of capital (ICC), computed using earnings forecasts, is useful in capturing time variation in expected stock returns. First, we show theoretically that ICC is perfectly correlated with the conditional expected stock return under plausible conditions. Second, our simulations show that ICC is helpful in detecting an intertemporal risk-return relation, even when earnings forecasts are poor. Finally, in empirical analysis, we construct the time series of ICC for the G-7 countries. We find a positive relation between the conditional mean and variance of stock returns, at both the country level and the world market level..Printed journal

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Ketersediaan

Call Number	Location	Available
	PSB lt.dasar - Pascasarjana	1

Penerbit	American Finance Association.,
Edisi	-
Subjek	Simulation Time series Cost of capital Correlation analysis Earnings forecasting studies Expected returns
ISBN/ISSN	221082
Klasifikasi	-
Deskripsi Fisik	-
Info Detail Spesifik	-
Other Version/Related	Tidak tersedia versi lain
Lampiran Berkas	Tidak Ada Data