Advanced Search
MyIDEAS: Login

Empirical Evidence for Models to Estimate the Cost of Equity Capital

Contents:

Author Info

  • Eliseu Martins

    (USP - University of São Paulo)

  • Fernando Caio Galdi

    (USP - University of São Paulo)

  • Gerlando Augusto Sampaio Franco de Lima

    (USP - University of São Paulo)

  • George Anthony Necyk

    (USP - University of São Paulo)

  • Cesar Henrique Shogi Abe

    (USP - University of São Paulo)

Registered author(s):

    Abstract

    This article investigates whether there are statistically significant differences among the costs of equity capital of Brazilian companies estimated by four models and their variants: Gordon, CAPM, APM and Ohlson-Juettner. We used a cross-section of 34 companies that were part of the São Paulo Stock Exchange Index (IBOVESPA) on December 29, 2005. The results do not permit saying that the choice of model makes no difference in estimating the cost of equity capital, so the methodology hypothesis was rejected. The models based on profit and dividend projections, notably the OJ and Gordon models, resulted in equivalent mean values and also were those that most resemble each other. The OJ model appears to be theoretically superior to the Gordon and Gordon & Gordon models, given that it was developed with fewer premises and in a more analytic manner.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bbronline.com.br/public/edicoes/3_2/artigos/vzsmldv3kk29112010142353.pdf
    File Function: Full text
    Download Restriction: no

    Bibliographic Info

    Article provided by Fucape Business School in its journal Brazilian Business Review.

    Volume (Year): 3 (2006)
    Issue (Month): 2 (July)
    Pages: 135-152

    as in new window
    Handle: RePEc:bbz:fcpbbr:v:3:y:2006:i:2:p:135-152

    Contact details of provider:
    Postal: Fucape Business School Brazilian Business Review Av. Fernando Ferrari, 1358, Boa Vista CEP 29075-505 Vitória-ES
    Phone: +55 27 4009-4423
    Fax: +55 27 4009-4422
    Web page: http://www.bbronline.com.br/
    More information through EDIRC

    Related research

    Keywords: company valuation; cost of equity capital; difference of means test.;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bbz:fcpbbr:v:3:y:2006:i:2:p:135-152. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarah Lasso).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.