Sector Cost of Equity in African Financial Markets
38 Pages Posted: 24 Mar 2009 Last revised: 2 Nov 2009
Date Written: March 22, 2009
Abstract
This paper assesses the effectiveness of Liu (2006) metrics in measuring illiquidity within a multifactor CAPM pricing model. Costs of equity are estimated using this model for the major industrial sectors within Africa’s larger equity markets: Morocco, Tunisia, Egypt, Kenya, Nigeria, Zambia, Botswana and South Africa. In all countries, the cost of equity is found to be highest in the financial sector and lowest in the blue chip stocks of Tunisia, Morocco, Namibia and South Africa. At an aggregate level, Nigeria and Zambia have the highest cost of capital.
Keywords: Africa, Capital Asset Pricing Model, Liquidity, Emerging Financial Markets
JEL Classification: G12, G15, O16
Suggested Citation: Suggested Citation
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