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Capital Asset Pricing Model and the Cost of Equity Share Capital On the Sarajevo Stock Exchange

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  • Emira Kozarević
  • Jasmina Džafić

Abstract

The capital asset pricing model (CAPM) represents a tool for interconnection analysis between risk and yield. The basic idea of this model is the identification of expected yield/cost of specific investment through a corresponding risk-free rate of investment, market risk premium, and measure of systemic risk (ï ¢). The cost of capital is the rate that company needs to pay, either explicitly or implicitly, to investors for their capital or the minimum rate of return (yield) required by supplier of capital. The basic goal of this paper is to present the possibilities of applying this model to determine the cost of capital for the company whose shares are quoted on the Sarajevo Stock Exchange (SASE).

Suggested Citation

  • Emira Kozarević & Jasmina Džafić, 2014. "Capital Asset Pricing Model and the Cost of Equity Share Capital On the Sarajevo Stock Exchange," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 2(2), pages 88-96.
    • Handle: RePEc:rss:jnljee:v2i2p4
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