The DOI matches its Crossref record; 2 of the 2 references it cites were found in a registry or an index.
Assessing Alternative Proxies for the Expected Risk Premium
Open accessAbstract
Managers, investors, and researchers have a compelling interest in identifying a reliable empirical proxy for firm-specific cost of equity capital (r). In theory, deducing r is possible if the market's future cash flow forecast and current stock price are observable. Practically, deducing r is dependent on the ability to estimate the market's forecasted terminal value. We evaluate five methods of deducing firm-specific r (labeled rDIVPREM, rGLSPREM, rGORPREM, rOJNPREM, and rPEGPREM) that deal with this conundrum differently. The extent to which the estimates are associated with firm risk in a stable and meaningful manner is the basis for our assessment. We find that the rDIVPREM and rPEGPREM estimates are consistently and predictably related to risk, while the alternatives are not. Based on these results, we conclude that rDIVPREM and rPEGPREM dominate the alternatives.
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Cites
CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*
Sharpe, W. F. (1964) · The Journal of Finance · doi:10.1111/j.1540-6261.1964.tb02865.x · Cited by 19,441
Disclosure, Liquidity, and the Cost of Capital
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Cited by
HAIL, L., & LEUZ, C. (2006) · Journal of Accounting Research · doi:10.1111/j.1475-679x.2006.00209.x · Cited by 1,371
Voluntary environmental disclosure quality and firm value: Further evidence
Plumlee, M., Brown, D., Hayes, R. M., & Marshall, R. S. (2015) · Journal of Accounting and Public Policy · doi:10.1016/j.jaccpubpol.2015.04.004 · Cited by 1,031
Self-citationTransparency, Liquidity, and Valuation: International Evidence on When Transparency Matters Most
LANG, M., LINS, K. V., & MAFFETT, M. (2012) · Journal of Accounting Research · doi:10.1111/j.1475-679x.2012.00442.x · Cited by 821
Adopting a Label: Heterogeneity in the Economic Consequences Around IAS/IFRS Adoptions
DASKE, H., HAIL, L., LEUZ, C., & VERDI, R. (2013) · Journal of Accounting Research · doi:10.1111/1475-679x.12005 · Cited by 710
Legal protection of investors, corporate governance, and the cost of equity capital
Chen, K. C. W., Chen, Z., & Wei, K. C. J. (2009) · Journal of Corporate Finance · doi:10.1016/j.jcorpfin.2009.01.001 · Cited by 669
Metadata
- Authors
- Botosan, C. A., & Plumlee, M. A.
- Venue
- The Accounting Review
- Publisher
- American Accounting Association
- Published
- 2005-01-01
- Volume
- 80
- Issue
- 1
- Pages
- 21-53
- ISSN
- 0001-4826 (ISSN-L)
- 1558-7967
- OpenAlex
- W2082394957
- Cited by
- 750
- References
- 2
- FWCI
- 101.35
- Type
- journal article
- Language
- en
- Open access
- green
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- Botosan, C. A., & Plumlee, M. A. (2005). Assessing Alternative Proxies for the Expected Risk Premium. The Accounting Review. https://doi.org/10.2308/accr.2005.80.1.21
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