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    Implied cost of capital investment strategies - evidence from international stock markets

    Esterer, F. and Schröder, David (2014) Implied cost of capital investment strategies - evidence from international stock markets. Annals of Finance 10 (2), pp. 171-195. ISSN 1614-2446.

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    Abstract

    Investors can generate excess returns by implementing trading strategies based on publicly available equity analyst forecasts. This paper captures the information provided by analysts by the implied cost of capital (ICC), the internal rate of return that equates a firm's share price to the present value of analysts' earnings forecasts. We find that U.S. stocks with a high ICC outperform low ICC stocks on average by 6.0% per year. This spread is significant when controlling the investment returns for their risk exposure as proxied by standard pricing models. Further analysis across the world's largest equity markets validates these results.

    Metadata

    Item Type: Article
    Additional Information: The final publication is available at link.springer.com
    Keyword(s) / Subject(s): analyst forecasts, implied cost of capital, international equity markets, market efficiency
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: David Schroeder
    Date Deposited: 01 Oct 2013 12:07
    Last Modified: 31 Jul 2019 08:36
    URI: http://eprints.bbk.ac.uk/id/eprint/8250

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