Estimating the cost of capital of the UK's newly privatized utilities

Andrew Clare and Richard Priestley ()

Applied Economics Letters, 1996, vol. 3, issue 10, 653-657

Abstract: In this paper the cost of capital of the UK's newly privatized utilities is estimated using both the CAPM and the APT. It is found that the APT provides a better description of excess security returns than the CAPM. However, neither model can explain the crosssection of excess returns on the sample of UK utilities. The failure of the factor models is traced to the existence of considerable idiosyncratic risk inherent in the utility stocks.

Date: 1996
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DOI: 10.1080/135048596355871

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