On the Estimation of Cost of Equity using Industrial CAPM Approach

This paper is an attempt to empirically investigate the industrial risk premium and realized return relationship by extending hybrid CAPM of Bodnar, Dumas, and Marston (2004). The inclusion of the industry risk premium offers more sophisticated results. Fama and Macbeth (1973) methodology are applied to test this relationship. The results indicate that there is a positive and significant relationship of the industry risk premium for Pakistan, India, and Brazil, whereas, it is insignificant for China, Russia, and South Africa. It is also seen that other risk premiums are insignificant for the said countries if industry risk premium is considered. The results also indicate that industry risk premium is only significant for those countries where the firms are mostly operated through the family business environment like Pakistan, India, and Brazil. This may lead to conclude that the industry risk premium can be used as the agency cost of minatory shareholders and controlling shareholders. This study provides an insight for the global investors, FPI holders, local and global mutual fund managers, to incorporate this industry risk premium into the existing CAPM framework especially for the countries where the business is managed as a family environment.

Download Full-text

Company-Specific Risk and Small Company Valuation

Journal of Forensic Accounting Research ◽

10.2308/jfar-19-026 ◽

2021 ◽

Author(s):

Lauren A Cooper ◽

James A. DiGabriele ◽

Richard A. Riley ◽

Trevor L. Sorensen

Keyword(s):

Risk Premium ◽

Private Company ◽

Private Companies ◽

Risk Premiums ◽

Specific Risk ◽

Company Valuation ◽

Capitalization Rate ◽

The Cost ◽

Industry Risk

A significant role of forensic accountants is valuing privately held companies (Domino, Stradiot and Webinger 2015; Trugman 2017; Allee, Erickson, Esplin and Yohn 2020). This study examines the role of private company transaction features on the composition of capitalization rates, industry risk premiums, and company-specific risks for private companies. We find that company-specific risk accounts for at least 50 percent of the capitalization rate. Further, while the industry risk premium represents less than 2 percent of the capitalization rate, it is significantly associated with company-specific risk, suggesting that industry risk is an important determinant of company-specific risk. Finally, we find evidence that several private company transaction features are associated with company-specific risk. These findings represent an important step in understanding capitalization rates and company-specific risk for private company valuation. These findings should also help practitioners and academics better determine the cost of capital for private companies.

Download Full-text

Relationship of family environment and marital adjustment of mothers of mentally challenged children

PsycEXTRA Dataset ◽

10.1037/e682942012-086 ◽

2011 ◽

Author(s):

R. Chawla ◽

V. Kashyap

Keyword(s):

Family Environment ◽

Marital Adjustment ◽

Relationship Of

Download Full-text

A Critical Analysis of Selected Public and Private Mutual Fund Schemes in India

Restaurant Business ◽

10.26643/rb.v118i8.7207 ◽

2019 ◽

Vol 118 (8) ◽

pp. 28-34

Author(s):

Dr. V. Murali Krishna ◽

Dr T. Hima Bindu ◽

Dr. Ravikumar Gunakala

Keyword(s):

Mutual Funds ◽

Capital Market ◽

Mutual Fund ◽

Portfolio Diversification ◽

Financial Intermediaries ◽

Public And Private ◽

Fund Managers ◽

Fixed Base ◽

Banking Institutions ◽

Different Levels

Mutual Fund Industry is one of the emerged dominant financial intermediaries in Indian Capital Market. The main objective of investing in a mutual fund is to diversify risk. Though the mutual fund invests in diversified portfolio, the fund managers take different levels of risk in order to achieve the schemes objectives. Mutual funds allow portfolio diversification and relative risk management through collection of funds from the savers/investors, the same investing in equity and debt stocks. This type of invested funds is managed by professional experts called as fund managers Funds are categorized as income should fixed base in India are a kind of mutual fund which makes investment in debt securities that have been issued to the corporate, banking institutions and to government in general

Download Full-text