2011
DOI: 10.1111/j.1911-3846.2011.01096.x
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The Relation between Expected Returns, Realized Returns, and Firm Risk Characteristics*

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Cited by 210 publications
(194 citation statements)
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References 56 publications
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“…We control for unlevered beta (UBETA), firm size (LnMV), the book-to-market ratio (LnBM), leverage (LEV), and the forecast of long-term earnings growth (FLTG) as these variables are correlated with the cost of equity (Botosan et al, 2011). We also control for idiosyncratic risk (STD_RESRET) as idiosyncratic volatility should matter under incomplete information (Merton, 1987).…”
Section: Model Specificationmentioning
confidence: 99%
“…We control for unlevered beta (UBETA), firm size (LnMV), the book-to-market ratio (LnBM), leverage (LEV), and the forecast of long-term earnings growth (FLTG) as these variables are correlated with the cost of equity (Botosan et al, 2011). We also control for idiosyncratic risk (STD_RESRET) as idiosyncratic volatility should matter under incomplete information (Merton, 1987).…”
Section: Model Specificationmentioning
confidence: 99%
“…If the patent-related information is known to the equity markets, firms with NOAs would be considered less risky and thus would face a lower cost of equity capital relative to the set of firms that did not have such information. We test whether this is true by regressing the implied cost of equity measured during the NOA period on our indicator variable (NOAInd) and controls for firm-specific risk factors [market beta, market value of equity, book-to-market, leverage, and long-term growth (Botosan et al 2011)]. 30 We are unable to document a statistical relation between the implied cost of capital and NOAInd that we would expect if the equity markets were aware of the NOA information prior to the public disclosure of the patent.…”
Section: Presence Of Private Informationmentioning
confidence: 99%
“…Specifically, we estimate of the cost of equity capital r PEG as the square root of (E 0 (EPS 2 ) -E 0 (EPS 1 )/P 0 ). The firm-specific factors included in the model (e.g., market beta, market value of equity) are consistent with the proxies employed in Botosan et al (2011).…”
mentioning
confidence: 97%
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“…Examples of this approach to calculating expected returns include Gebhardt, Lee, and Swaminathan (2001) and Ohlson and Juettner-Nauroth (2005). However, the validity of ICOC estimates as measures of expected return is unclear, because empirical evidence on the ability of ICOC estimates to predict future stock returns is mixed (Easton and Monahan 2005;Botosan, Plumlee, and Wen 2011).…”
Section: Implied Cost Of Capitalmentioning
confidence: 99%