Costs of equity capital and model mispricing

Article Abstract:

It is worth considering whether factor-based pricing models have potential for use by those responsible for making decisions about company finances. Research in this area has used the CAPM pricing model, where the single factor is specified to be the excess return on a market index portfolio, a model with three factors extracted from returns on a large cross section of stocks and a model containing the market factor plus two additional factors. It has been established that costs of equity capital implied by factor-based pricing models can be estimated in a Bayesian setting.

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Portfolio selection and asset pricing models

Article Abstract:

US investors tend to strongly believe in the domestic capital assets pricing model when choosing equity holdings. Since the 1940s, the prior degree of belief in pricing models has operated independently of finance theory.

Stocks & Other Equity Securities, Psychological aspects, Management, Capital assets pricing model, Capital asset pricing model

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Stock valuation and learning about profitability

Article Abstract:

The market-to-book ratio is examined for stocks that do not pay dividends and younger stocks in relation to firm profitability. Return volatility is linked to profit volatility.

Comparative analysis, Return on investment, Rate of return

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