The Performance of Alternative Methods for Estimating Equity Betas of Jordan Industries

Research Journal of Finance and Accounting, Vol. 6, No. 16, 2015

17 Pages Posted: 2 Nov 2015

Date Written: July 30, 2015

Abstract

This paper discovers the industry cost of equity for Jordan. Initially, after ranking Jordan industries into five portfolios are based on sorting four variables; beta, size, value and momentum factors. This paper shows that none of the return differences regarding these four factors are significant at the 5% level. Further, the paper also investigates the bias of the standard CAPM approach for each industry separately, and examines the effectiveness of alternative beta estimators. The finding of this work shows that constant betas produce better estimates of cost of equity for particular industries (mostly either ‘defensive’ or ‘high-risk’ industries). The paper succeeds in offering a meaningful assessment of the empirical reality of the CAPM, as well as offering guidance concerning the suitable practical application of the CAPM when estimating industry cost of equity.

Suggested Citation

Gharaibeh, Omar Khlaif, The Performance of Alternative Methods for Estimating Equity Betas of Jordan Industries (July 30, 2015). Research Journal of Finance and Accounting, Vol. 6, No. 16, 2015. Available at SSRN: https://ssrn.com/abstract=2684998

Omar Khlaif Gharaibeh (Contact Author)

Al Albayt University ( email )

AL-Hashemia
Ajloun, 00962
Jordan

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
28
Abstract Views
194
PlumX Metrics