Capital Cost Planning: Topically Orientated Trend Adjustment on the Swedish Market

Bachelor Thesis from the year 2009 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, University of Applied Sciences Braunschweig / Wolfenbüttel, language: English, abstract: This study evaluates 3-month Swedish Euro-Krona Treasury bill rate forecasts between January 1995 and December 2008. Cost of capital is expressed in interest rates, it is crucial to forecast competently and correctly the future interest rates. Despite anomalous intensive research efforts in the past, still today it is not possible to expand, to explicit, and widely accept solutions. One main reason for this is the emphasis on current market interest rates by prognosticators, instead of forecasting future interest rates. Therefore the goal of this Bachelor Thesis is to determine whether the 19 credit institutions in Sweden based their interest rate forecasts on the current market interest rate or not. In total, 40 forecast time series with 4019 forecast data were scrutinized. With the tool of TOTA coefficient the interest rate forecasts of the topically orientated trend adjustment will be analyzed. None of the forecast time series proved to be unbiased, in every forecast the topically orientated trend adjustment was available. Such forecasts are un-suitable on which to base capital cost planning decisions.