Discussion of “Evaluating cross-sectional forecasting models for implied cost of capital”

Discussion of “Evaluating cross-sectional forecasting models for implied cost of capital” Rev Account Stud (2014) 19:1186–1190 DOI 10.1007/s11142-014-9288-5 Discussion of ‘‘Evaluating cross-sectional forecasting models for implied cost of capital’’ Mei Feng Published online: 23 May 2014 Springer Science+Business Media New York 2014 An estimate of the implied cost of capital (ICC) is useful in valuation, investment, and capital budgeting. The computation of ICC requires earnings forecasts, for which prior studies generally use analyst forecasts to proxy. Hou et al. (2012) generate earnings forecasts using a cross-sectional model and thus estimate ICC for a large sample of firms, including those not covered by analysts. Li and Mohanram (2014) extend Hou et al. by considering two other cross- sectional earnings forecast models (RI and EP models). Li and Mohanram compare their models with the one in Hou et al. in two ways. First, they show that the earnings forecasts generated from their models outperform those from the Hou et al. model on forecast accuracy, forecast bias, and earnings response coefficients. Second, the ICC computed based on the earnings forecasts generated from the Hou et al. model exhibits lower correlations with future returns and more abnormal correlations with risk factors than the ICCs from the RI and EP models. The improvement in performance http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Discussion of “Evaluating cross-sectional forecasting models for implied cost of capital”

Loading next page...
 
/lp/springer_journal/discussion-of-evaluating-cross-sectional-forecasting-models-for-zlUxXVbCwH
Publisher
Springer US
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Accounting/Auditing; Finance/Investment/Banking; Public Finance & Economics
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-014-9288-5
Publisher site
See Article on Publisher Site

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches

$49/month

Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.

$588

$360/year

billed annually
Start Free Trial

14-day Free Trial