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Communication Dans Un Congrès Année : 2023

Higher-moments estimation of industry-level cost of equity capital with errors-in-variables

Mehmet Hakan Satman
  • Fonction : Auteur

Résumé

Despite several anomalies documented in the literature, the CAPM is still widely used in practice to estimate discount rates for the valuation of firms and projects. In this paper, we conduct an empirical exercise to address the errors-in-variables (EIV) problem in the estimation of the industry-level cost of equity capital. We compare the results obtained using naive OLS against those from an instrumental variables approach developed by Dagenais and Dagenais (1997). Although the presence of EIV is statistically not detectable in some cases, we argue that the differences in the output from the two estimation techniques can lead to considerable gaps when it comes to use the results in any discounted cash-flow analysis.
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Dates et versions

hal-04230321 , version 1 (05-10-2023)

Identifiants

  • HAL Id : hal-04230321 , version 1

Citer

Erkin Diyarbakirlioglu, Mehmet Hakan Satman. Higher-moments estimation of industry-level cost of equity capital with errors-in-variables. International Conference in Finance, Banking and Accounting, Montpellier Business School, Sep 2023, Montpellier, France. ⟨hal-04230321⟩
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