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The cost of equity in emerging markets: The case of Latin America

Maximiliano González, Urbi Garay and Rosso John
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Maximiliano González: School of Management, Universidad de los Andes
Rosso John: School of Management, Universidad de Los Andes

No 38, Galeras. Working Papers Series from Universidad de Los Andes. Facultad de Administración. School of Management

Abstract: We applied ten methods to calculate the cost of equity in a set of companies included in the MSCI emerging markets list from five countries in Latin America. The methods modify the discount rate obtained using the standard Capital Asset Pricing Model (CAPM) by adjusting for country risk premiums. We found that country effects are more important than industry effects in Latin America. This work also contributes to a better understanding of how different ways of calculating country risk can affect a firm’s cost of equity. Furthermore, it gives empirical evidence for specific country and industry determinants of the cost of equity that are not explicitly treated in the extant literature

Keywords: Cost of equity; Latin America; Market integration (search for similar items in EconPapers)
Pages: 20 pages
Date: 2014-02-01
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Persistent link: https://EconPapers.repec.org/RePEc:uac:somwps:038

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