topic Re: Estimating implied cost of capital in Statistical Procedures

Estimating implied cost of capital

min6275 — Tue, 12 Jul 2016 12:34:19 GMT

I am trying to calculate the implied cost of capital (k_ct in the model below) of four models following Hail and Leuz (2006, 2009) with SAS using IBES dataset.

I have tried using 'proc model' but SAS keeps saying that I need to define the parameters.

So I have tried generating 10000 rates by using do i=1 to 10000 and setting rate = t/10000 and plugging the rates into the model to come up with 10000 prices (left hand variable).

But this seems to take too long and I still cannot get the result with required precision.

Can anyone please recommend me better way to solve this problem?

Thank you in advance.

Re: Estimating implied cost of capital

Rick_SAS — Tue, 12 Jul 2016 12:51:28 GMT

Please post your PROC MODEL code so we can see how you've implemented the model.

Re: Estimating implied cost of capital

min6275 — Wed, 13 Jul 2016 02:30:07 GMT

data ae_parm; set ae;
	do t=1 to 1000;
	prc=prc;
	bkvlps=bkvlps;
	medest=medest;
	r_cl=rand('Uniform');
	medest2=medest2; bkv1=bkv1; medest3=medest3; bkv2=bkv2;medest4=medest4; bkv3=bkv3;medest5=medest5; bkv4=bkv4;
	growth=growth;
	output;
	end;
run;

data goal; set ae;
	prc=prc;
	bkvlps=bkvlps;
	medest=medest;
	medest2=medest2; bkv1=bkv1;	medest3=medest3; bkv2=bkv2;medest4=medest4; bkv3=bkv3;medest5=medest5; bkv4=bkv4;
	growth=growth;
run;


proc model data = ae_parm noprint outmodel = r_cl;
	endogenous r_cl;
	prc = bkvlps + (medest - bkvlps*r_cl)/(1+r_cl) + (medest2 - bkv1*r_cl)/(1+r_cl)**2 + (medest3 - bkv2*r_cl)/(1+r_cl)**3 +(medest4 - bkv3*r_cl)/(1+r_cl)**4 + (medest5 - bkv4*r_cl)/(1+r_cl)**5
			+ ((medest5 - bkv4*r_cl) + (1 + growth))/((r_cl - growth) * ((1+r_cl)**5));
	fit prc/ outest = prcest;
	solve r_cl  /estdata = prcest data = goal;
run;

This is the code I have used trying to estimate r_cl.

I am new to using SAS so I just tried to follow the sample code from online but it doesn't seem to be working as intended.

Re: Estimating implied cost of capital

sassssssssss — Mon, 14 Jun 2021 13:17:37 GMT

I have got the same problem. Did you manage to solve it?