Ex Ante Cost of Equity Estimates of S&P 500 Firms: The Choice between Global and Domestic CAPM
Robert S. Harris
University of Virginia - Darden School of Business
Felicia C. Marston
University of Virginia - McIntire School of Commerce
Dev R. Mishra
University of Saskatchewan - Edwards School of Business
Thomas J. O'Brien
University of Connecticut - Department of Finance
Darden Business School Working Paper No. 02-09
We estimate ex ante expected returns for a sample of S&P 500 firms over the period 1983-98. The exante estimates show a better overall fit with the domestic version of the single-factor CAPM than with the global version, but the difference is small. This finding has no trend in time and is consistent across groups formed on the basis of relative foreign sales. The findings suggest that, for estimating the cost of equity, the choice between the domestic and global CAPMs may not be a material issue for many large U.S. firms.
Accepted Paper Series
Date posted: January 10, 2005
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