Valuation Cost of Equity Capital in the Conditions of Economic Instability on Emerging Markets (by the Example of Russia)

Elena A. Kolesnichenko (), Vladislav Y. Sutyagin (), Yana Yu. Radyukova (), Valentina V. Smagina () and Inna N. Yakunina ()
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Elena A. Kolesnichenko: Tambov State University named after G. R. Derzhavin
Vladislav Y. Sutyagin: Tambov State University named after G. R. Derzhavin
Yana Yu. Radyukova: Tambov State University named after G. R. Derzhavin
Valentina V. Smagina: Tambov State University named after G. R. Derzhavin
Inna N. Yakunina: Tambov State University named after G. R. Derzhavin

A chapter in Russia and the European Union, 2017, pp 383-391 from Springer

Abstract: Abstract The objective of the research. The article is devoted to the problem of valuation of the cost of equity capital in the conditions of economic instability and financial crisis in the emerging markets. The authors analyze the modern tools (for valuation of the cost of capital) in terms of their applicability to emerging economies (for example, Russia). Short description of methodology. In the article the authors touch upon the explanatory and deductive models (methods) of valuation of the cost of equity and their feature of application in the conditions of financial instability. In the first block of methods the authors analyze the CAPM, Fama-French, APT and Build-Up Summation models. Special attention is paid to the CAPM model and its practical prevalence. Compilation of the most important research results and their significance. In the article the authors describe the features of estimation of basic elements of CAPM model (such as risk-free rate, equity market risk premium) in the modern Russian conditions. In addition, the article discusses how an alternative (deductive) approach (based on the dividend discount model / cash flow) can be used in valuating the cost of equity, and the authors speak about the prospects of its application in the conditions of economic instability and crisis.

Keywords: Risk free rate; Cost of equity; Capital assets pricing model; Arbitration pricing model; Fama-French model; Equity market risk premium; Free cash flow on equity (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-319-55257-6_50

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DOI: 10.1007/978-3-319-55257-6_50

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