Ex Ante Cost of Equity Estimates of S&P 500 Firms: The Choice between Global and Domestic CAPM
Financial Management 32(3), 2003, 51-66
24 Pages Posted: 4 Oct 2002 Last revised: 10 Nov 2015
Date Written: August 1, 2002
We estimate ex ante expected returns for a sample of S&P 500 firms over the period 1983-1998. The ex ante 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 CAPM may not be a material issue for many large US firms.
Keywords: Ex Ante, Cost of Equity, CAPM
JEL Classification: G12, G15, G32
Suggested Citation: Suggested Citation