We investigate the U.S. aggregated Implied Cost of Capital (ICC) from 1987:01 to 2011:02 from a nonlinear perspective. We use a so called bottom-up approach, i.e. according to Jäckel/Mühlhäuser (2011) we compute monthly firmspecific ICC by averaging over the methods from Claus/Thomas (2001), Gebhardt et al. (2001), Ohlson/Juettner-Nauroth (2005) and Easton (2004) and value-weight over the companies to obtain an aggregated ICC. According to Coakley/Fuertes (2006) we allow for asymmetric behaviour of the ICC by using a Threshold Autoregressive Model (TAR) with a constant mean. We detect that mean-reversion is only present during the up-regime. These are times of risk-aversion in the market. An asymmetric behaviour could have impacts on the absorption process of shocks. This is investigated by computing the so called Generalized Impulse Response Function (GIR) from Koop et al. (1996). We examine wheather the state of the series (down-regime or up-regime) or the sign (negative or positive) of the occuring shock plays a role in the absorption process. We find that shocks occuring in the down-regime are more pronounced and show a different pattern than shocks in the up-regime. Because differences in the mean-reversion and shock absorption process could have infuence on the forecasting power, we finally use the Bonferroni Q-test from Campbell/Yogo (2006) searching for predictive power of the ICC. We find predictive power for the Implied Equity Risk Premium (ERP).     «

We investigate the U.S. aggregated Implied Cost of Capital (ICC) from 1987:01 to 2011:02 from a nonlinear perspective. We use a so called bottom-up approach, i.e. according to Jäckel/Mühlhäuser (2011) we compute monthly firmspecific ICC by averaging over the methods from Claus/Thomas (2001), Gebhardt et al. (2001), Ohlson/Juettner-Nauroth (2005) and Easton (2004) and value-weight over the companies to obtain an aggregated ICC. According to Coakley/Fuertes (2006) we allow for asymmetric behaviour...     »