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Cost of equity of Internet stocks: A downside risk approach, The

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  • Estrada, Javier

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    (IESE Business School)

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    Abstract

    Beta as a measure of risk has been under fire for many years. Although practitioners still widely use the CAPM to estimate the cost of equity of companies, they are aware of its problems and are looking for alternatives. One possible alternative is to estimate the cost of equity based on the semideviation, a well-known and intuitively plausible measure of downside risk. Complementing evidence reported elsewhere about the ability of the semideviation to explain the cross-section of returns in emerging markets and that of industries in emerging markets, this article reports results showing that the semideviation also explains the cross-section of Internet stock returns.

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    Bibliographic Info

    Paper provided by IESE Business School in its series IESE Research Papers with number D/491.

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    Length: 20 pages
    Date of creation: 14 Feb 2003
    Date of revision:
    Handle: RePEc:ebg:iesewp:d-0491

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    Keywords: downside risk; semideviation; asset pricing;

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    1. Pereiro, Luis E., 2001. "The valuation of closely-held companies in Latin America," Emerging Markets Review, Elsevier, vol. 2(4), pages 330-370, December.
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