Working Paper

Market Structure and the Cost of Capital

Mohamed El Hedi Arouri, Christophe Rault, Robert Sova, Anamaria Sova
CESifo, Munich, 2013

CESifo Working Paper No. 4097

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.

CESifo Category
Monetary Policy and International Finance
Empirical and Theoretical Methods
Keywords: finance, international asset pricing, firm's cost of capital segmentation
JEL Classification: G150, F360, C320