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Market structure and the cost of capital

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  • El Hedi Arouri, Mohamed
  • Rault, Christophe
  • Sova, Anamaria
  • Sova, Robert
  • Teulon, Frédéric

Abstract

We contribute to the finance literature in two main ways. First, we present a theoretical capital asset pricing model (CAPM) to price assets in different market structures. Second, we use our model to analyze whether when markets are partially segmented using the local or the global CAPM yields significant errors in the estimation of the cost of capital for a sample of firms from developed and emerging countries.

Suggested Citation

  • El Hedi Arouri, Mohamed & Rault, Christophe & Sova, Anamaria & Sova, Robert & Teulon, Frédéric, 2013. "Market structure and the cost of capital," Economic Modelling, Elsevier, vol. 31(C), pages 664-671.
  • Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:664-671
    DOI: 10.1016/j.econmod.2013.01.004
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    Cited by:

    1. Petzev, Ivan & Schrimpf, Andreas & Wagner, Alexander F, 2015. "Has the Pricing of Stocks Become More Global?," CEPR Discussion Papers 10966, C.E.P.R. Discussion Papers.
    2. Doyle, Jason P. & Pentecost, Robin D. & Funk, Daniel C., 2014. "The effect of familiarity on associated sponsor and event brand attitudes following negative celebrity endorser publicity," Sport Management Review, Elsevier, vol. 17(3), pages 310-323.
    3. repec:ipg:wpaper:2014-557 is not listed on IDEAS
    4. repec:ipg:wpaper:2014-558 is not listed on IDEAS

    More about this item

    Keywords

    Finance; International asset pricing; Firm's cost of capital; Segmentation;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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