Asset Pricing and Cost of Equity in the Tunisian Banking Sector: Panel Data Evidence
Sami Ben Naceur and
Samir Ghazouani ()
Economic Notes, 2007, vol. 36, issue 1, 89-113
In spite of popularity and theoretical simplicity of the one‐factor Capital Asset Pricing Model (CAPM) used in the valuation of financial assets, researchers are more concerned with the important extension proposed by Fama and French (1993), that is, the Three‐Factor Pricing Model (TFPM). Alongside beta, average stock returns could be explained by some size and book‐to‐market supplementary effects. With these two complementary models, estimation of the cost of equity is carried out for the Tunisian banking sector. In order to account for inter‐individual heterogeneity, estimation of parameters is conducted according to random coefficient specifications within the context of panel data analysis.
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