Open AccessA note on local industry asset betas for cost of capital computations
Author(s) -
D. J. Bradfield
Publication year - 1998
Publication title -
south african journal of business management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.179
H-Index - 15
eISSN - 2078-5976
pISSN - 2078-5585
DOI - 10.4102/sajbm.v29i2.769
Subject(s) - capital asset pricing model , portfolio , context (archaeology) , cost of capital , economics , asset (computer security) , econometrics , capital (architecture) , premise , financial economics , microeconomics , computer science , profit (economics) , history , paleontology , linguistics , philosophy , computer security , archaeology , biology
Based on the premise that portfolio betas are more reliable than individual betas, it is advocated that industry asset betas rather than individual betas be used when proxies are required in cost of capital calculations. In this article local industry asset betas are empirically estimated and contrasted to US estimates. The results reveal that not all USA industry risks are translatable to the SA context and thus attempts should be made to estimate industry risks locally for cost of capital computations.