Universität zu Köln

Launhardt, Patrick and Miebs, Felix (2020). Aggregate implied cost of capital, option-implied information and equity premium predictability. Financ. Res. Lett., 35. SAN DIEGO: ACADEMIC PRESS INC ELSEVIER SCIENCE. ISSN 1544-6131

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Abstract

The aggregate implied cost of capital (ICC) from analyst estimates finds a variety of applications in finance and is documented to predict the equity premium. Yet, the construction of the analyst-based ICC is data intensive and imposes restrictions on the employed analyst estimates. We suggest a new way to obtain a market-wide ICC using implied information from index options. We show that the resulting ICC predicts the equity premium in- and out-of-sample. At the same time, we find that the predictive power of the aggregate ICC from analyst estimates is not prevalent in our sample once we control for the persistence of the variable.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Launhardt, Patrick UNSPECIFIED UNSPECIFIED UNSPECIFIED Miebs, Felix UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-328334
DOI:	10.1016/j.frl.2019.101305
Journal or Publication Title:	Financ. Res. Lett.
Volume:	35
Date:	2020
Publisher:	ACADEMIC PRESS INC ELSEVIER SCIENCE
Place of Publication:	SAN DIEGO
ISSN:	1544-6131
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language RETURNS; TESTS Multiple languages Business, Finance Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/32833