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New approach to estimating the cost of common equity capital for public utilities

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  • Pauline Ahern
  • Frank Hanley
  • Richard Michelfelder

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Suggested Citation

  • Pauline Ahern & Frank Hanley & Richard Michelfelder, 2011. "New approach to estimating the cost of common equity capital for public utilities," Journal of Regulatory Economics, Springer, vol. 40(3), pages 261-278, December.
    • Handle: RePEc:kap:regeco:v:40:y:2011:i:3:p:261-278
    DOI: 10.1007/s11149-011-9160-5
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    References listed on IDEAS

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    1. Harvey, Campbell R., 2001. "The specification of conditional expectations," Journal of Empirical Finance, Elsevier, vol. 8(5), pages 573-637, December.
    2. Campbell, John Y., 1987. "Stock returns and the term structure," Journal of Financial Economics, Elsevier, vol. 18(2), pages 373-399, June.
    3. Eugene A. Pilotte & Frederic P. Sterbenz, 2006. "Sharpe and Treynor Ratios on Treasury Bonds," The Journal of Business, University of Chicago Press, vol. 79(1), pages 149-180, January.
    4. Lanne, Markku & Luoto, Jani, 2008. "Robustness of the risk-return relationship in the U.S. stock market," Finance Research Letters, Elsevier, vol. 5(2), pages 118-127, June.
    5. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 205-251, April.
    6. Robert S. Harris & Felicia C. Marston & Dev R. Mishra & Thomas J. O’Brien, 2003. "Ex Ante Cost of Equity Estimates of S&P 500 Firms: The Choice Between Global and Domestic CAPM," Financial Management, Financial Management Association, vol. 32(3), Fall.
    7. Michelfelder, Richard A. & Pilotte, Eugene A., 2011. "Treasury Bond risk and return, the implications for the hedging of consumption and lessons for asset pricing," Journal of Economics and Business, Elsevier, vol. 63(6), pages 582-604.
    8. Whitelaw, Robert F, 1994. "Time Variations and Covariations in the Expectation and Volatility of Stock Market Returns," Journal of Finance, American Finance Association, vol. 49(2), pages 515-541, June.
    9. John H. Cochrane (ed.), 2006. "Financial Markets and the Real Economy," Books, Edward Elgar Publishing, number 2923.
    10. Campbell, John Y, 1993. "Intertemporal Asset Pricing without Consumption Data," American Economic Review, American Economic Association, vol. 83(3), pages 487-512, June.
    11. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-887, September.
    12. Lanne, Markku & Saikkonen, Pentti, 2006. "Why is it so difficult to uncover the risk-return tradeoff in stock returns?," Economics Letters, Elsevier, vol. 92(1), pages 118-125, July.
    13. Engle, Robert F & Lilien, David M & Robins, Russell P, 1987. "Estimating Time Varying Risk Premia in the Term Structure: The Arch-M Model," Econometrica, Econometric Society, vol. 55(2), pages 391-407, March.
    14. Eugene F. Fama & Kenneth R. French, 2004. "The Capital Asset Pricing Model: Theory and Evidence," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 25-46, Summer.
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    Cited by:

    1. Darryl Biggar, 2023. "A re-examination of the foundations of the cost of capital for regulatory purposes," Journal of Regulatory Economics, Springer, vol. 64(1), pages 1-33, December.
    2. Michelfelder, Richard A. & Ahern, Pauline & D'Ascendis, Dylan, 2019. "Decoupling impact and public utility conservation investment," Energy Policy, Elsevier, vol. 130(C), pages 311-319.
    3. Othieno, Ferdinand & Biekpe, Nicholas, 2019. "Estimating the conditional equity risk premium in African frontier markets," Research in International Business and Finance, Elsevier, vol. 47(C), pages 538-551.
    4. Michelfelder, Richard A., 2015. "Empirical analysis of the generalized consumption asset pricing model: Estimating the cost of capital," Journal of Economics and Business, Elsevier, vol. 80(C), pages 37-50.

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    More about this item

    Keywords

    Public utilities; Cost of capital; GARCH; Consumption asset pricing model; G12; L94; L95;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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