Estimating the Cost-of-Equity Capital Using Empirical Asset Pricing Models

2018 ◽  
Vol 19 (1) ◽  
pp. 105-154
Author(s):  
Chris Kirby
Keyword(s):  
Asset Pricing ◽  
Equity Capital ◽  
Empirical Asset Pricing ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Pricing Models ◽  
Asset Pricing Models ◽  
The Cost

The Predictive Performance of Asset Pricing Models: Evidence from the Australian Securities Exchange

2016 ◽  
Vol 19 (04) ◽  
pp. 1650023 ◽  
Author(s):  
Robert J. Bianchi ◽  
Michael E. Drew ◽  
Timothy Whittaker
Keyword(s):  
Asset Pricing ◽  
Predictive Performance ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Pricing Models ◽  
Observation Window ◽  
Asset Pricing Models ◽  
Ex Post ◽  
The Cost

This paper considers the accuracy (or otherwise) of cost of equity estimates provided by a range of Australian asset pricing models on industry returns. The results suggest that a simple, constant-benchmark approach (fixed excess return of five percent per annum) provides the best forecast for the cost of equity capital for the various industry segments of the Australian Securities Exchange examined across the observation window. Our results from Australia corroborate U.S. findings regarding the disconnect between asset pricing models that provide the best ex-post explanation of asset returns and models that produce superior ex-ante predictions of the cost of capital.

scholarly journals Information Asymmetry, Ownership Structure and Cost of Equity Capital: The Formation for Open Innovation

2021 ◽  
Vol 7 (1) ◽  
pp. 48
Author(s):  
Ade Imam Muslim ◽  
Doddy Setiawan
Keyword(s):  
Stock Market ◽  
Information Asymmetry ◽  
Ownership Structure ◽  
Trading Volume ◽  
Foreign Ownership ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Ownership Structures ◽  
The Cost

Our study aims to investigate how information asymmetry and ownership structure affect cost of equity capital. For that purpose, we collected 246 issuers over 4 years for a total of 984 observations. By using panel data processing, we found that the information asymmetry we proxied through Price non-Synchronization and trading volume had an effect on the cost of equity capital. Our results also confirmed both Agency Theory and Pecking Order Theory. Both theories are in line with the conditions of the stock market in Indonesia. In addition, we found that institutional and foreign ownership structures also had an effect on the cost of equity capital. Furthermore, our results also confirmed Interest Alignment Theory and Entrenchment Theory. Our research is expected to contribute to the debate on the existence of information asymmetry and ownership structures in relation to the cost of equity capital. We also hope that it will be a valuable input for investors in considering their investment. Moreover, from the results of this study, investors can also consider foreign ownership or institutional ownership in determining their investment. In addition, stock market regulators in Indonesia can develop approaches to minimize information asymmetry and encourage foreign investors to invest in Indonesia.

Sign in / Sign up

Export Citation Format

Share Document