Title: New Methods of Studying Expected Return:Summary of Implied Cost of Capital
Abstract: Asset pricing models seek to establish the determinants of financial assets'expected rates of return.Classic asset pricing models predict that an asset's expected return should be positively related to its systematic market risk.However,researchers have to use realized return as a proxy for expected return in tests of these models.Realized return may be not a good proxy for expected return because noise in realized returns is likely to be large and information surprises do not cancel out over the period of study.Now,researchers turn to an ex ante approach from the shareholders' point of view,and use the implied cost of capital as a measure of expected return on equity.The measurement of expected return combined with corporate finance and accounting is the core of this methods.According to the research context,this paper describes the development of the methods thoroughly and provides the research direction in the future.
Publication Year: 2012
Publication Date: 2012-01-01
Language: en
Type: article
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