Best Practice for Cost-of-Capital Estimates
| Autor: | Ivo Welch, Yaron Levi |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
040101 forestry
Market capitalization Economics and Econometrics 050208 finance Best practice 05 social sciences Estimator 04 agricultural and veterinary sciences Work (electrical) Cost of capital Accounting 0502 economics and business Econometrics Economics Predictive power 0401 agriculture forestry and fisheries Finance Stock (geology) Factor analysis |
| Zdroj: | Journal of Financial and Quantitative Analysis. 52:427-463 |
| ISSN: | 1756-6916 0022-1090 |
| DOI: | 10.1017/s0022109017000114 |
| Popis: | Cost-of-capital assessments with factor models require quantitative forward-looking estimates. We recommend estimating Vasicek-shrunk betas with 1–4 years of daily stock returns and then shrinking betas asecondtime (and more for smaller stocks and longer-term projects), because the underlying betas are themselves time-varying. Such estimators also work well in other developed countries and for small-minus-big (SMB) and high-minus-low (HML) exposures. If own historical stock returns are not available, peer betas based on market cap should be used. Historical industry averages have almost no predictive power and should never be used. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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