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 Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | David Schroeder |
| Date Deposited: | 01 Oct 2013 12:07 |
| Last Modified: | 02 Aug 2023 17:07 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/8250 |
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