Because of their freedom, charter schools face a unique opportunity to transform American education. Nowhere is this opportunity more compelling than in the area of “human resources” the ways charter schools mobilize and motivate staff to achieve results. Though the legal framework varies from state to state, most charter schools possess a great deal of autonomy when it comes to managing people.
Parents influence their children through genetic inheritance but also by the time and financial resources dedicated to them. While genes are hard to change, resources may vary over time. The main question addressed in this paper is the following: how well do parents shield children from fluctuations in family resources? This involves understanding whether time investments and goods expenditures in children change substantially with income shocks; whether the effects on child specific expenditures are different than effects on nondurable consumption; and whether income shocks are transferred to a child’s human capital.
Sound estimates of the cost of capital are crucial for evaluating investments and for corporate valuation. Current state-of-the-art methods of estimating the cost of equity capital, such as the CAPM or the Fama and French Three-Factor Model, have not only produced disappointing results empirically (Fama and French (1997, 2004)). They are also questionable in that they use average realized returns instead of measures of expected returns for which the underlying theories on asset pricing call for.
Recently, Claus and Thomas (2001), Gebhardt, Lee, and Swaminathan (2001) and Easton, Taylor, Shroff, and Sougiannis (2002) have proposed an alternative approach to estimating a firm’s expected cost of equity capital that does not rely on realized returns. Their idea uses a model of corporate valuation to generate a market-implied cost of equity capital. These studies define this implied cost of equity capital as the internal rate of return that equates the current stock price of a firm to the present value of the market’s expected future residual flows to common shareholders as approximated by observable financial analysts’ consensus forecasts.
