Risk, Expected Return, and the Cost of Equity Capital

About this item

Title

Risk, Expected Return, and the Cost of Equity Capital

Content partner

University of Canterbury Library

Collection

UC Research Repository

Description

In applying the Capital Asset Pricing Model (CAPM) to cost of capital calculations, practitioners treat the market risk premium as a free parameter to be estimated from data. However, this process ignores equilibrium in the cash market and therefore the implications of the CAPM for the premium itself. Full equilibrium relates the premium to underlying fundamental parameters, a finding that holds out the promise of identifying time-variation in the cost of capital. Unfortunately, this yields e...

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Format

Research paper

Research format

Journal article

Date created

2005

Creator

Boyle, G.

URL

http://hdl.handle.net/10092/5838

Related subjects

Commerce, management, tourism and services / Banking, finance and investment / Investment and risk management / Economics / Applied Economics

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