Removing predictable analyst forecast errors to improve implied cost of equity estimates

Disaggregation, auditor conservatism and implied cost of equity capital: An international evidence from the GCC

“…11 Larocque (2013) estimates the realized return in Easton and Sommers' (2007) model supplements for returns' news and earnings' news. This is also supported by Mohanram and Gode (2013) who indicate that removing predictable analyst errors leads to stronger association between the implied cost of capital, adjusted forecasts and realized return. 12 For comparative purposes and so we can also take advantage of the varying benefits of each model, we use three models of ICOE based on firm-specific models: rt-oj is the implied cost of equity based on Ohlson and Juetnner-Nauroth (2005); rt-peg is the implied cost of equity based on Easton (2004); and rt-peg-RW is the implied cost of equity capital based on Easton (2004) with random walk forecasts using Bradshaw et al 's (2012) …”

Rationality in precious metals forward markets: Evidence of behavioural deviations in the gold markets

“…Lewis (1989) examined predictions regarding the US Dollar using forward rates and attributed 50% of the errors to a learning issue and the remaining 50% to a risk premium. Mohanram and Gode (2013) find a strong link between the cost of equity, as a measure of risk, and analysts forecast errors for stocks. However Gurkaynak and Wolfers (2006) examine the market for macroeconomic derivatives and find only a very small risk premium.…”

Analyst information precision and small earnings surprises

“…We expect these implications to apply to a wider range of settings, given that variables of interest are commonly related to a firm's information environment. Moreover, the relation between forecast uncertainty and the sign of earnings surprises is likely to be important for studies that rely on signed earnings surprises in other contexts, such as when modeling predictable variation in analysts' forecast errors (e.g., Hughes et al 2008;Mohanram and Gode 2013;So 2013).…”