Analysts’ estimates of the cost of equity capital

We explore a large sample of analysts' estimates the cost equity capital (CoE) to evaluate their usefulness as expected return proxies (ERP). find that CoE are significantly related firm's beta, size, book-to-market ratio, leverage, and idiosyncratic volatility but not other risk proxies. Even after controlling for popular predictors, incrementally predict future stock returns. This predictive ability is better explained containing ERP information rather than reflecting mispricing. When evaluated against traditional ERPs, including implied costs capital, found be least noisy. Finally, we document responses around earnings announcements, demonstrating study discount-rate reactions market participants. conclude meaningful ERPs can fruitfully employed in variety asset pricing contexts.