Testing international asset pricing models using implied costs of capital

Journal of Financial and Quantitative Analysis

Volumn 44, Issue 2, 2009, Pages 307-335

  Lee, Charles ^a   Ng, David ^b   Swaminathan, Bhaskaran ^c  

^a Federal Service for Surveillance on Consumer Rights Protection and Human Well Being   (United States)

^b Department of Obstetrics Gynecology   (United States)

^c LSV Asset Management   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 68949200144     PISSN: 00221090     EISSN: 17566916     Source Type: Journal    
DOI: 10.1017/S0022109009090164     Document Type: Article

References (55)

1. Adler, M, and B. Dumas. "International Portfolio Choice and Corporation Finance: A Synthesis." Journal of Finance,38 (1983), 925-984.
2. Ang, A., and G. Bekaert. "Stock Return Predictability: Is It There?" Review of Financial Studies, 20 (2007), 651-707.
3. Ang, A.; R. Hodrick; Y. Xing; and X. Zhang. "The Cross-Section of Volatility and Expected Returns." Journal of Finance,61 (2006), 259-299.
4. Ang, A.; R. Hodrick; Y. Xing; and X. Zhang. "High Idiosyncratic Volatility and Low Returns: International and Further U.S. Evidence." Journal of Financial Economics,91 (2009), 1-23.
5. Ang, J., and S. J. Ciccone. "International Differences in Analyst Forecast Properties." Working Paper, Florida State University (2001).
6. Banz, R. "The Relationship Between Return and Market Value of Common Stocks." Journal of Financial Economics,9 (1981), 3-18.
7. Bekaert, G., and C. R. Harvey. "Time-Varying World Market Integration." Journal of Finance, 50 (1995), 403-444.
8. Bhandari, L. C. "Debt/Equity Ratio and Expected Common Stock Returns: Empirical Evidence." Journal of Finance,43 (1988), 507-528.
9. Bossaerts, P., and P. Hillion. "Implementing Statistical Criteria to Select Return Forecasting Models: What Do We Learn?" Review of Financial Studies,12 (1999), 405-428.
10. Botosan, C, and M. Plumlee. "Assessing Alternative Proxies for the Expected Risk Premium." Accounting Review,80 (2005), 21-53.
11. Brealey, R., and S. Myers. Principles of Corporate Finance.Boston, MA: Irwin McGraw-Hill (2000).
12. Chan, L. K.; J. Karceski; and J. Lakonishok. "The Risk and Return from Factors." Journal of Financial and Quantitative Analysis,33 (1998), 159-188.
13. Chan, L. K.; J. Karceski; and J. Lakonishok. "The Level and Persistence of Growth Rates." Journal of Finance,58 (2003), 643-684.
14. Chan, K. C; G. A. Karolyi; and R. M. Stulz. "Global Financial Markets and the Risk Premium on U.S. Equity." Journal of Financial Economics,32(1992), 137-168.
15. Claus, J., and J. Thomas. "Equity Premia as Low as Three Percent? Evidence from Analysts' Earnings Forecasts for Domestic and International Stock Markets." Journal of Finance,56 (2001), 1629-1666.
16. Daniel, K.; D. Hirshleifer; and A. Subrahmanyam. "Overconfidence, Arbitrage, and Equilibrium Asset Pricing." Journal of Finance,56 (2001), 921-965.
17. Daniel, K., and S. Titman. "Evidence on the Characteristics of Cross Sectional Variation in Stock Returns." Journal of Finance,52(1997), 1-33.
18. Daniel, K; S. Titman; and K. Wei. "Explaining the Cross-Section of Stock Returns in Japan: Factors or Characteristics." Journal of Finance,56 (2001), 743-766.
19. Davis, J; E. Fama; and K. French. "Characteristics, Covariances, and Average Returns: 1929 to 1997." Journal of Finance,55 (2000), 389-406.
20. De Moor, L., and P. Sercu. "The Small Firm Anomaly: U.S. and International Evidence." Working Paper, KU Leuven (2006).
21. De Santis, G., and B. Gerard. "How Big Is the Premium for Currency Risk?" Journal of Financial Economics,49 (1998), 375-412.
22. Dumas, B., and B. Solnik. "The World Price of Foreign Exchange Risk." Journal of Finance, 50 (1995), 445-479.
23. Easton, P. "PE Ratios, PEG Ratios, and Estimating the Implied Expected Rate of Return on Equity Capital." Accounting Review,79 (2004), 73-95.
24. Elton, E. J. "Expected Return, Realized Return, and Asset Pricing Tests." Journal of Finance, 54(1999), 1199-1220.
25. Errunza, V., and E. Losq. "International Asset Pricing under Mild Segmentation: Theory and Test." Journal of Finance,40 (1985), 105-124.
26. Fama, E., and K. R. French. "The Cross-Section of Expected Stock Returns." Journal of Finance, 47 (1992), 427-465.
27. Fama, E., and K. R. French. "Common Risk Factors in the Returns on Stocks and Bonds." Journal of Financial Economics,33 (1993), 3-56.
28. Fama, E., and K. R. French. "Value versus Growth: The International Evidence." Journal of Finance, 53(1998), 1975-1999.
29. Fama, E., and K. R. French. "The Equity Premium." Journal of Finance,57 (2002), 637-659. Ferson, W., and C. R. Harvey. "The Risk and Predictability of International Equity Returns." Review of Financial Studies,6 (1993), 527-566.
30. Frankel, R., and C. Lee. "Accounting Diversity and International Valuation." Working Paper, Cornell University (1999).
31. Gebhardt, W.; C. Lee; and B. Swaminathan. "Toward an Implied Cost of Capital." Journal of Accounting Research,39(2001), 135-176.
32. Gode, D., and P. Mohanram. "Inferring the Cost of Capital Using the Ohlson-Juettner Model." Review of Accounting Studies,8 (2003), 399-431.
33. Goyal, A., and I. Welch. "Predicting the Equity Premium with Dividend Ratios." Management Science, 49 (2003), 639-654.
34. Griffin, J. "Are the Fama and French Factors Global or Country Specific?" Review of Financial Studies,15 (2002), 783-803.
35. Guay, W.; S. P. Kothari; and S. Shu. "Properties of Implied Cost of Capital Using Analysts' Forecasts." Working Paper, University of Pennsylvania (2005).
36. Hail, L., and C. Leuz. "International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?" Journal of Accounting Research,44 (2006), 485-531.
37. Harvey, C. R. "The World Price of Covariance Risk." Journal of Finance,46 (1991), 111-157.
38. Heston, S.; K. G. Rouwenhorst; and R. Wessels. "The Structure of International Stock Returns and the Integration of Capital Markets." Journal of Empirical Finance,2 (1995), 173-197.
39. Hou, K.; G. A. Karolyi; and B. Kho. "What Factors Drive Global Stock Returns?" Working Paper, Ohio State University (2006).
40. Ince, O., and R. Porter. "Individual Equity Return Data from Thomson Datastream: Handle with Care≠" Journal of Financial Research,29 (2006), 463-479.
41. Jorion, P. "The Pricing of Exchange Rate Risk in the Stock Market." Journal of Financial and Quantitative Analysis,26 (1991), 363-376.
42. Jorion, P., and E. Schwartz. "Integration vs. Segmentation in the Canadian Stock Market." Journal of Finance,41(1986), 603-614.
43. Karolyi, G. A., and R. Stulz. "Are Financial Assets Priced Locally or Globally?" In Handbook of the Economics of Finance,G. M. Constantinides, M. Harris, and R. M. Stulz, eds. Amsterdam: North Holland-Elsevier (2003), 975-1020.
44. Lakonishok, J.; A. Shleifer; and R. W. Vishny. "Contrarian Investment, Extrapolation, and Risk." Journal of Finance,49 (1994), 1541-1578.
45. Malkiel, B., and Y. Xu. "Idiosyncratic Risk and Security Returns." Working Paper, Princeton University (2002).
46. Merton, R. "On Estimating the Expected Return on the Market: An Exploratory Investigation." Journal of Financial Economics,8 (1980) 323-361.
47. Modigliani, F., and M. H. Miller. "The Cost of Capital, Corporation Finance and the Theory of Investment." American Economic Review,48 (1958), 261-297.
48. Nissim, D., and S. H. Penman. "Ratio Analysis and Equity Valuation: From Research to Practice." Review of Accounting Studies,6 (2001), 109-154.
49. Ohlson, J., and B. E. Juettner-Nauroth. "Expected EPS and EPS Growth as Determinants of Value." Review of Accounting Studies,10 (2005), 349-365.
50. Pastor, L.; M. Sinha; and B. Swaminathan. "Estimating the Intertemporal Risk-Return Tradeoff Using the Implied Cost of Capital." Journal of Finance,63 (2008), 2859-2897.
51. Sercu, P. "A Generalization of the International Asset Pricing Model." Revue de VAssociation Fran-caise de Finance,1 (1980), 91-135.
52. Solnik, B. "An Equilibrium Model of the International Capital Market." Journal of Economic Theory,8 (1974), 500-524.
53. Spiegel, M., and X. Wang. "Cross-Sectional Variation in Stock Returns: Liquidity and Idiosyncratic Risk." Working Paper, Yale University (2006).
54. Stulz, R. "A Model of International Asset Pricing." Journal of Financial Economics,9 (1981), 383-406.
55. Zhang, X. "Specification Tests of International Asset Pricing Models." Journal of International Money and Finance,25 (2006), 275-307.