Analysis of factors affecting expected stock returns based on the implied cost of capital
Subject Areas : Journal of Investment Knowledge
Azita Jahanshad
1
,
Mahmood Parsaei
2
1 - Assistant professor of Islamic Azad University, Central Tehran Branch
2 - Student of master of accounting of Islamic Azad University, Central Tehran
Keywords: stock expected return model, the implied cost of capital, liquidity, Return, growth potential,
Abstract :
Expected return on equity is an important variable in the analysis of financial firms. Accurate measurement of this variable and its determinants is one of the most important issues in financial research. Due to inefficient estimates of the expected return on realized returns, accounting and financial studies have suggested an alternative approach to estimating expected returns. This approach implied cost of capital (ICC) called on the firm's internal rate of return that the firm's stock price equals the present value of future cash flows expected return. The main objective of this paper is to investigate the determinants of expected returns estimated based on implied cost of capital for listed companies in Tehran Stock Exchange is 89. The determinants of expected returns in previous research, several factors as independent variables and controls included liquidity, long-term return on investment, growth potential, the level of stock prices, value companies, financial leverage, firm size and systematic risk in was used. Multivariate statistical methods to test the hypotheses were used. The results indicate that the liquidity, growth potential, the level of stock prices, firm size and firm value estimated in accordance with the expected returns implied cost of capital models, positive significant relationship exists. Also, a significant negative relationship between long-term reversal of capital, financial leverage and systemic risk with expected return implied cost of capital estimates are based on the reverse.