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Ex Ante Cost-of-Capital Analysis by Liviu Frîncu is a document available to read on EtoBox.
This document summarizes a working paper that estimates ex ante (expected) cost of capital for stocks using a discounted residual income valuation model. The paper finds that ex ante cost of capital estimates are more stable over time and across firms than ex post (realized) return measures. Ex ante cost of capital is positively correlated with leverage, liquidity risk, information risk, and earnings variability. Specifically, the market demands a higher risk premium for stocks with high leverage, low liqui
- Author
- Liviu Frîncu
- Language
- EN