The Cost of Equity Capital in Stock Portfolios Listed on The Warsaw Stock Exchange Using the Classic CAPM

• Autorzy: Stanisław Urbański
• Języki publikacji: EN

Abstrakty

EN

This work is an attempt to estimate the cost of equity capital characteristic among portfolios of companies listed on the Warsaw Stock Exchange in the years 1995-2017. To this end, the classic CAPM is used to estimate the cost of risk. Model tests are based on 252 monthly returns. In order to assess the errors of cost of capital estimation, the bootstrap method is used. The estimated cost of capital refers to the project portfolio with real options on these projects. Stock returns are generated not only by the companies implementing projects but also through real options modifying these projects. The estimated cost of capital can be a valuable indicator for portfolio managers. Also, it can be an approximate indicator for making decisions on the implementation of new investment projects. The estimated cost of capital assumes the highest values for value portfolios. The estimated cost of capital assumes the small values for growth portfolios. (original abstract)

Słowa kluczowe

EN

Stock market companies; Capital cost; Capital Asset Pricing Model (CAPM)

PL

Spółki giełdowe; Koszt kapitału; Model wyceny aktywów kapitałowych

• Czasopismo: e-Finanse
• Rocznik: 2019
• Tom: 15
• Numer: nr 2
• Strony: 48--62

Twórcy

autor

Stanisław Urbański

• AGH University of Science and Technology Kraków, Poland

Bibliografia

• Banz, R.W. (1981). The Relationship between Return and Market Value of Common Stock. Journal of Financial Economics, 9(1), 3-18.
• Berk, J., Green, R., Naik, V. (1999). Optimal Investment, Growth Options, and Security Returns. Journal of Finance, 54, 1553 -1607.
• Bernardo, A., Chowdry, B., Goyal, A. (2007). Growth Options, Beta, and the Cost of Capital. Financial Management, 36, 5-17.
• Brigham, E.F., Gapensky L.C. (2000). Zarządzanie finansami. Warszawa: Polskie Wydawnictwo Ekonomiczne.
• Cornell, B. (1999). The Equity Risk Premium: The Long-Run Future of the Stock Market, New York: John Wiley & Sons.
• Damodaran, A. (2017). Equity Risk Premiums (ERP): Determinants, Estimation and Implications - The 2017 Edition, Working Paper, March 2013.
• Efron, B., Tibshirani, R.J. (1993). An Introduction to the Bootstrap. New York: Chapman and Hall CRC.
• Fama, E.F., French, K.R. (1992). The Cross-Section of Expected Stock Returns. Journal of Finance, 47(2), 427-465.
• Fama, E.F., French, K.R. (1993). Common Risk Factors in the Returns on Stock and Bonds. Journal of Financial Economics, 33(1), 3-56
• Fama, E.F., French, K.R. (2002). The Equity Premium. The Journal of Finance, 57(2), 637- 659.
• Fernandez, P. (2011). The Magnitude and Concept of the Equity Premium in 150 Textbooks. Social Science Research network, 16 (July), 2011. Available at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1898167.
• Ferson, W., Locke, D.H. (1998). Estimating the Cost of Capital Through Time: An Analysis of the Sources of Error. Management Science, 44(4), 485-500.
• Gibbons, M.R., Ross, S.A., Shanken, J. (1989). A Test of the Efficiency of a Given Portfolio. Econometrica, 57(5), 1121- 1152.
• Graham, J.R., Harvey, C.R. (2001). The Theory and Practice of Corporate Finance: Evidence from the Field. Journal of Financial Economics, 60, 187-243.
• Hamada, R.S. (1972). The Effect of the Firm's Capital Structure on the Systematic Risk of Common Stocks. Journal of Finance, 27(2), 435-452.
• Jegadeesh, N., Titman, S. (1993). Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency. Journal of Finance, 48(1), 65-91.
• Jagannathan, R., Wang, Z. (1996). The Conditional CAPM and the Cross-Section of Expected Returns. Journal of Finance, 51(1), 3-53.
• Kozarević, E., Džafić, J. (2014). Capital Asset Pricing Model and the Cost of Equity Share Capital on the Sarajevo Stock Exchange. Journal of Empirical Economics, 2(2), 88-96.
• Lakonishok, J., Shapiro, A.C. (1986). Systematic Risk, Total Risk, and Size as Determinants of Stock Market Returns. Journal of Banking and Finance, 10(1), 115-132.
• Lakonishok, J., Shleifer, A., Vishny, R. (1994). Contrarian Investment, Extrapolation, and Risk. Journal of Finance, 49, 1541-1578.
• Lettau, M., Ludvigson, S. (2001). Resurrecting the (C) CAPM: A Cross-Sectional Test when Risk Premia Are Time-Varying. Journal of Political Economy, 109(6), 1238-1287.
• Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. Review of Economics and Statistics, 47(1), 13-37.
• Mauboussin, M.J., Callahan, D. (2013). Estimating the Cost of Capital. A Practical Guide to Assessing Opportunity Cost. Credit Suisse, Global financial strategies, October 8. Retrieved from: www.credit- suisse.com.
• Pratt, S.P. (2002). Cost of Capital. Estimation and Applications. New Jersey: John Wiley & Sons, Inc., Hoboken.
• Ranosz, R., Kowal, B. (2016). Szacowanie kosztu kapitału własnego spółek górniczych z zastosowaniem modelu D-CAPM. Finanse, Rynki Finansowe, Ubezpieczenia, 82/2(4), 271-278.
• Ranosz, R., Kustra, A. (2013). Koszt kapitału własnego spółek górniczych w Polsce. Zeszyty Naukowe Uniwersytetu Szczecińskiego, Finanse, Rynki Finansowe, Ubezpieczenia, 60, 277-285.
• Reinganum, M.R. (1981). A New Empirical Perspective on the CAPM. Journal of Financial and Quantitative Analysis, 16(4), 439-462.
• Rosenberg, B., Reid, K., Lanstein, R. (1985). Persuasive Evidence of Market Inefficiency. Journal of Portfolio Management, 11(3), 9- 16.
• Shanken, J. (1985). Multivariate Tests of the Zero-Beta CAPM. Journal of Financial Economics, 14, 327-348.
• Shanken, J. (1992). On the Estimation of Beta-Pricing Models. The Review of Financial, 5(1), 1-33.
• Sharpe, W.F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance, 19(3), 425- 442.
• Urbański, S.(2011). Modelowanie równowagi na rynku kapitałowym - weryfikacja empiryczna na przykładzie akcji notowanych na Giełdzie Papierów Wartościowych w Warszawie. Katowice: Prace Naukowe Uniwersytetu Ekonomicznego w Katowicach.
• Urbański, S. (2012). Multifactor Explanations of Returns on the Warsaw Stock Exchange in Light of the ICAPM. Economic Systems, 36, 552-570.
• Urbański, S., Jawor, P., Urbański, K. (2014).The Impact of Penny Stocks on the Pricing of Companies Listed on The Warsaw Stock Exchange in Light of the CAPM. Folia Oeconomica Stetinensia, 14(2), 163- 178.
• Urbański, S. (2015). The Impact of Speculation on the Pricing of Companies Listed on the Warsaw Stock Exchange in Light of the ICAPM. Managerial Economics, 16(1), 91- 111.
• Welch, I. (2008). The Consensus Estimate for the Equity Premium by Academic Financial Economists in December 2007. Unpublished Working Paper. Brown University.
• Zhi, D., Guo, R.J., Jagannathan, R. (2012). CAPM for Estimating the Cost of Equity Capital: Interpreting the Empirical Evidence. Journal of Financial Economics, 10, 204-220.

Identyfikatory

DOI

10.2478/fiqf-2019-0011