Estimating the Cost of Equity and Equity Risk-Premia of Canadian Firms

George Athanassakos ()
Additional contact information
George Athanassakos: Wilfrid Laurier University, Canada

Multinational Finance Journal, 1997, vol. 1, issue 3, 229-254

Abstract: This article proposes an alternative approach to estimating the required rate of return on equity, combining the bond-plus risk-premium approach and the Capital Asset Pricing Model, and tests it using Canadian data. Individual stock risk-premia are classified into groups according to the point in the business cycle, risk based on each company’s bond rating, and industry groups as defined by industry classification. Group averages are calculated. We find equity risk-premia are negatively related to interest rates and bond ratings. Moreover, the higher the risk of an industry group, the higher are the equity risk-premia. However, findings regarding the risk-premia’s sensitivity to the business cycle and stability across business cycles are not very conclusive.

Keywords: equity risk-premia; cost of equity; CAPM; bond-plus riskpremium (search for similar items in EconPapers)
JEL-codes: G12 G31 (search for similar items in EconPapers)
Date: 1997
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.mfsociety.org/modules/modDashboard/uplo ... epck5e91udt1v7g3.pdf
http://www.mfsociety.org/modules/modDashboard/uplo ... ogleScholar/640.html

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:1:y:1997:i:3:p:229-254

Access Statistics for this article

Multinational Finance Journal is currently edited by Panayiotis C. Andreou

More articles in Multinational Finance Journal from Multinational Finance Journal Contact information at EDIRC.
Bibliographic data for series maintained by Theodossiou Panayiotis ().