The term structure of implied costs of equity capital

The Term Structure of Equity Yields - A Bottom-Up Approach

“…The panel also shows a strongly positive and significant relation between the slope parameter and the market factor. This suggests that the risk-premium spread is equally a good empirical proxy for time-varying equity risk, in line with Callen and Lyle (2020).…”

“…If a full data set of dividend futures for all firms was available, one could possibly obtain different shapes of the market equity yield curve, but the positive aggregation effect will be the same. Callen and Lyle (2020), for example, show that firm-level equity yields are increasing with the time to maturity, on average. Combining this insight with our findings would suggest that the slope of the market equity yield curve is even greater than our calculations.…”

A study of the reliability of cross-sectional earnings forecasting models for estimating IPO firms’ implied cost of capital

“…Recent studies in this literature focus on the use of qualitative information, such as narrative disclosures, in earnings forecasting (Bochkay and Levine, 2017) and alternative estimation techniques, such as least absolute deviation (Evans et al , 2017) and mixed data sampling regressions (Ball and Ghysels, 2017) and econometric concerns (Gerakos and Gramacy, 2013). Other studies focus on the term structure of implied costs of equity capital (Callen and Lyle, 2019), correlations between future realised returns and the composite implied cost of capital estimated from cross‐sectional earnings forecasting models (Paton et al , 2020) and links between earnings and stock prices that are helpful in earnings forecasting (Harris and Wang, 2019).…”

Credit Absorption Capacity of Businesses in the Construction Sector of the Czech Republic—Analysis Based on the Difference in Values of EVA Entity and EVA Equity

“…The effects of idiosyncratic accounting information on the capital costs of businesses were examined by Gao [29], who explained the mixed empirical evidence concerning the relationship between the quality of information and capital costs. The static nature of the given models, especially in terms of the structure of assumed capital costs, was dealt with by Callen and Lyle [30] using a model based on forward option contracts. Tagliapietra, Zachman and Fredrikson [31] examined the highly topical issue of investments in sources of energy in the Czech Republic.…”