Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Using Forecasts of Earnings to Simultaneously Estimate Growth and the Rate of Return on Equity Investment

Using Forecasts of Earnings to Simultaneously Estimate Growth and the Rate of Return on Equity... We develop a method for simultaneously estimating the cost of equity capital and the growth in residual earnings that are implied by current stock prices, current book value of equity, and short‐term forecasts of accounting earnings. We demonstrate the use of our method by calculating the expected equity risk premium. Our estimate is higher than estimates in extant studies that are based on the same earnings forecast data. The main difference between our study and these papers is that while they provide arguments supporting an assumed rate of growth beyond the forecast horizon, we estimate this rate. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

Using Forecasts of Earnings to Simultaneously Estimate Growth and the Rate of Return on Equity Investment

Loading next page...
 
/lp/wiley/using-forecasts-of-earnings-to-simultaneously-estimate-growth-and-the-9di0NBcy10

References (15)

Publisher
Wiley
Copyright
University of Chicago on behalf of the Institute of Professional Accounting, 2002
ISSN
0021-8456
eISSN
1475-679X
DOI
10.1111/1475-679X.00066
Publisher site
See Article on Publisher Site

Abstract

We develop a method for simultaneously estimating the cost of equity capital and the growth in residual earnings that are implied by current stock prices, current book value of equity, and short‐term forecasts of accounting earnings. We demonstrate the use of our method by calculating the expected equity risk premium. Our estimate is higher than estimates in extant studies that are based on the same earnings forecast data. The main difference between our study and these papers is that while they provide arguments supporting an assumed rate of growth beyond the forecast horizon, we estimate this rate.

Journal

Journal of Accounting ResearchWiley

Published: Jun 1, 2002

There are no references for this article.