THE ARBITRAGE PRICING THEORY AND COST‐OF‐CAPITAL ESTIMATION: THE CASE OF ELECTRIC UTILITIES

THE ARBITRAGE PRICING THEORY AND COST‐OF‐CAPITAL ESTIMATION: THE CASE OF ELECTRIC UTILITIES Capital asset pricing model (CAPM) and alternative arbitrage pricing theory (APT) methodologies are used to estimate the cost of capital for a sample of electric utilities. The statistical factors APT method is found to produce significantly different estimates depending on the number of factors specified and the set of firms factor analyzed. The use of macroeconomic factors is explored, and it is shown that this methodology has advantages over the statistical factors APT and the market model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Financial Research Wiley

THE ARBITRAGE PRICING THEORY AND COST‐OF‐CAPITAL ESTIMATION: THE CASE OF ELECTRIC UTILITIES

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Publisher
Wiley
Copyright
© The Southern Finance Association and the Southwestern Finance Association
ISSN
0270-2592
eISSN
1475-6803
D.O.I.
10.1111/j.1475-6803.1991.tb00656.x
Publisher site
See Article on Publisher Site

Abstract

Capital asset pricing model (CAPM) and alternative arbitrage pricing theory (APT) methodologies are used to estimate the cost of capital for a sample of electric utilities. The statistical factors APT method is found to produce significantly different estimates depending on the number of factors specified and the set of firms factor analyzed. The use of macroeconomic factors is explored, and it is shown that this methodology has advantages over the statistical factors APT and the market model.

Journal

The Journal of Financial ResearchWiley

Published: Sep 1, 1991

References

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