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The cost of capital in internationally integrated markets: The case of Nestlé

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Author Info

  • René M. Stulz

Abstract

This paper argues that the cost of capital for firms in small countries should be estimated using the global CAPM rather than a local CAPM. Two related formulas showing the mistake made when using a local CAPM rather than a global CAPM are presented. the global CAPM is implemented for the case of Nestlé and the results are compared to the cost of capital estimate one obtains for Nestlé using a local CAPM when the global CAPM is appropriate. Copyright Blackwell Publishers Ltd. 1995.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-036X.1995.tb00003.x
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Bibliographic Info

Article provided by European Financial Management Association in its journal European Financial Management.

Volume (Year): 1 (1995)
Issue (Month): 1 ()
Pages: 11-22

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Handle: RePEc:bla:eufman:v:1:y:1995:i:1:p:11-22

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Citations

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Cited by:
  1. Mohamed El Hedi Arouri & Duc Khuong Nguyen, 2010. "Time-varying characteristics of cross-market linkages with empirical application to Gulf stock markets," Managerial Finance, Emerald Group Publishing, vol. 36(1), pages 57-70, January.
  2. Mohamed El Hedi Arouri & Christophe Rault & Ana Maria Sova & Robert Sova & Frédéric Teulon, 2013. "Market Structure and the Cost of Capital," Working Papers hal-00798048, HAL.
  3. Martin Evans and Richard K. Lyons, 2002. "Informational Integration and FX Trading," Working Papers gueconwpa~02-02-11, Georgetown University, Department of Economics.
  4. Walter Dolde & Carmelo Giaccotto & Dev R. Mishra & Thomas O'Brien, 2012. "Should managers estimate cost of equity using a two-factor international CAPM?," Managerial Finance, Emerald Group Publishing, vol. 38(8), pages 708-728, August.
  5. Mihir A. Desai & C. Fritz Foley & James R. Hines, 2006. "Capital Controls, Liberalizations, and Foreign Direct Investment," Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1433-1464.
  6. Zhang, Xiaoyan, 2006. "Specification tests of international asset pricing models," Journal of International Money and Finance, Elsevier, vol. 25(2), pages 275-307, March.
  7. He, Zhongzhi & Kryzanowski, Lawrence, 2007. "Cost of equity for Canadian and U.S. sectors," The North American Journal of Economics and Finance, Elsevier, vol. 18(2), pages 215-229, August.
  8. Michael R. King & Dan Segal, 2004. "International Cross-Listing and the Bonding Hypothesis," Working Papers 04-17, Bank of Canada.

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