Journal ArticleDOI
Equity Premia as Low as Three Percent? Evidence from Analysts' Earnings Forecasts for Domestic and International Stock Markets
James J. Claus,Jacob K. Thomas +1 more
TLDR
In this article, the authors estimate the equity premium from the discount rate that equates market valuations with prevailing expectations of future flows, and find that the average equity premium is around three percent (or less) in the United States and five other markets.Abstract:
The returns earned by U.S. equities since 1926 exceed estimates derived from theory, from other periods and markets, and from surveys of institutional investors. Rather than examine historic experience, we estimate the equity premium from the discount rate that equates market valuations with prevailing expectations of future flows. The accounting flows we project are isomorphic to projected dividends but use more available information and narrow the range of reasonable growth rates. For each year between 1985 and 1998, we find that the equity premium is around three percent (or less) in the United States and five other markets.read more
Citations
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Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting
TL;DR: In this article, the authors examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms' cost of equity capital.
Journal ArticleDOI
Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences
TL;DR: In this article, the authors examine the economic consequences of mandatory International Financial Reporting Standards (IFRS) reporting around the world and find that market liquidity increases around the time of the introduction of IFRS.
Journal ArticleDOI
Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting
TL;DR: In this article, the authors examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms' cost of equity capital.
Journal ArticleDOI
Does Corporate Social Responsibility Affect the Cost of Capital
TL;DR: This paper examined the effect of corporate social responsibility (CSR) on the cost of equity capital for a large sample of US firms and found that firms with better CSR scores exhibit cheaper equity financing.
Journal ArticleDOI
On the Use of Instrumental Variables in Accounting Research
TL;DR: Instrumental variable (IV) methods are commonly used in accounting research (e.g., earnings management, corporate governance, executive compensation, and disclosure research) when the regressor variables are endogenous as discussed by the authors.
References
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Journal ArticleDOI
THE EQUITY PREMIUM A Puzzle
Rajnish Mehra,Edward C. Prescott +1 more
TL;DR: This paper showed that an equilibrium model which is not an Arrow-Debreu economy will be the one that simultaneously rationalizes both historically observed large average equity return and the small average risk-free return.
Journal Article
Disclosure level and the cost of equity capital
TL;DR: In this paper, the authors examined the relationship between disclosure level and the cost of equity capital by regressing firm-specific estimates of cost of capital on market beta, firm size and a self-constructed measure of disclosure level.
Posted Content
The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors
TL;DR: In this article, a linearization of a rational expectations present value model for corporate stock prices produces a simple relation between the log dividend-price ratio and mathematical expectations of future log real dividend changes and future real discount rates.
ReportDOI
The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors
TL;DR: In this paper, the authors proposed a linearized model to evaluate the importance of real dividend growth, measured real discount rates, and unexplained factors in determining the dividend-price ratio for U.S. time series 1871-1986 and 1926-1986.
Journal ArticleDOI
A Variance Decomposition for Stock Returns
TL;DR: In this paper, a vector autoregressive method is used to break unexpected stock returns into two components, i.e., changes in expected future dividends or expected future returns, and the covariance of the two components.