Sector Cost of Equity in African Financial Markets

38 Pages Posted: 24 Mar 2009 Last revised: 2 Nov 2009

See all articles by Jenifer Piesse

Jenifer Piesse

University of Stellbosch; King's College London - Department of Management

Bruce Allen Hearn

University of Southampton

Date Written: March 22, 2009


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

Piesse, Jenifer and Hearn, Bruce Allen, Sector Cost of Equity in African Financial Markets (March 22, 2009). Emerging Markets Review, Vol. 10, No. 4, 2009. Available at SSRN:

Jenifer Piesse

University of Stellbosch

Stellenbosch, Western Cape
South Africa

King's College London - Department of Management ( email )

Virginia Woolf Building
22 Kingsway
London, England WC2B 6NR
United Kingdom

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

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