An Evaluation of Accounting-Based Measures of Expected Returns

By Peter D. Easton, S. Monahan. 2005

525 citations recorded by the source corpus.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/5452adf5e15ee1cf5ce6fd136067b8689bbd71b7

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Citations in the corpus

Does Mandatory Adoption of International Financial Reporting Standards in the European Union Reduce the Cost of Equity Capital (2009, unknown): “Because there is substantial measurement error and potential bias in implied cost of capital estimates (Easton and Monahan 2005), I use the mean of these four measures as the proxy for the cost of equity capital (Hail and Leuz 2006, 2009; Daske et al. 2007, 2008).9,10 My primary independent…”
Estimating the Intertemporal Risk-Return Tradeoff Using the Implied Cost of Capital (2006, unknown): “(20)As in Easton et al. (2002), we use an initial ICC estimate of 12% to compute the ratio of aggregate four-year cum-dividend earnings to book value of equity.”
Evaluating cross-sectional forecasting models for implied cost of capital (2014, unknown): “Second, an extensive literature has shown that the ICC proxies derived from analyst forecasts are unreliable showing 2 weak correlations with future returns (Easton and Monahan 2005) and anomalous correlations with risk factors.”
Are analysts’ earnings forecasts more accurate when accompanied by cash flow forecasts? (2009, background): “8 Elgers et al. (2003) and Bradshaw et al. (2001) find evidence consistent with analysts’ overreaction to the implication of current accruals for future earnings.”
Excess Control, Corporate Governance and Implied Cost of Equity: International Evidence (2009, unknown): “Easton and Monahan (2005) report that the cost of equity estimates of the residual income valuation model are sensitive to growth rate and their reliability decreases with larger and sluggish growth forecasts.”
When Does Information Asymmetry Affect the Cost of Capital (2011, background): “…cost of capital measures are an alternative proxy for expected returns, and there is an ongoing debate in the literature about the use of future returns versus implied cost of capital as a proxy for expected returns (e.g., Easton and Monahan, 2005; Guay, Kothari, and Shu, 2006; McInnis, 2010).”
Analysts’ Forecasts and Asset Pricing: A Survey (2016, unknown): “…the predictable and recurring nature of analysts’ biases discussed in Sections 2 and 3, prior research attempts to refine ICCs as a proxy of expected returns by removing predictable biases in analysts’ forecasts (e.g., Easton and Monahan (2005), Easton (2009), Hou et al. (2012), Larocque (2013)).”
Direct and Mediated Associations among Earnings Quality, Information Asymmetry, and the Cost of Equity (2012, background): “Easton and Monahan (2005), however, investigate a number of earnings forecast based cost of capital metrics including PEG , and conclude that no metric based on earnings forecasts is predictably related to future returns.”
Determinants and Economic Consequences of Non-financial Disclosure Quality (2016, unknown): “Given that existing measures of the implied cost of capital may contain noise (Easton & Monahan, 2005), we infer the effect of disclosure quality on the cost of capital by examining the pricing terms in seasonal equity offerings (SEOs) and corporate bond issuances.”
Multiple large shareholders, control contests, and implied cost of equity (2008, background): “…empirically investigate whether MLS have a monitoring role over the largest owner that influences firms’ governance and information 7 The evidence in Easton and Monahan (2005) suggests that the reliability of the cost of equity estimates of the residual valuation models decreases with larger and…”
Conditional conservatism and cost of capital (2011, unknown): “We document a significant and negative coefficient on the Conservatism portfolio in a firm specific time series regression that correlates returns contemporaneously with Conservatism, the three Fama and French (1993) risk factors (beta, size, and book to market) and a momentum factor (Carhart 1997).”