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JOURNAL OF ACCOUNTING AND FINANCE
Estimating the Discount Rate of S&P 500 Portfolio With Cointegration Analysis
Author(s): Kai Chen, Richard D. Marcus
Citation: Kai Chen, Richard D. Marcus, (2020) "Estimating the Discount Rate of S&P 500 Portfolio With Cointegration Analysis," Journal of Accounting and Finance, Vol. 20, ss. 5, pp. 11-19
Article Type: Research paper
Publisher: North American Business Press
Abstract:
Using cointegration analysis, this paper examines the evolution of the discount rate of S&P 500 portfolio from 1926 to 2019. By estimating on a 30-year time window moving over time, we find that the discount rate has gradually become significantly smaller. The results suggest that capital cost in the U.S. stock market, represented by the discount rate of S&P 500 portfolio, has been declining as time goes by, which implies that the U.S. stock market has become more informative and efficient, since the risk of a stock, which determines its capital cost, is associated with the stock’s asymmetric information.
