INDUSTRY COSTS OF EQUITY

Authors
FAMA EF FRENCH KR
Citation
Ef. Fama et Kr. French, INDUSTRY COSTS OF EQUITY, Journal of financial economics, 43(2), 1997, pp. 153-193
Citations number
27
Categorie Soggetti
Economics,"Business Finance
Journal title
Journal of financial economics → ACNP
ISSN journal
0304405X
Volume
43
Issue
2
Year of publication
1997
Pages
153 - 193
Database
ISI
SICI code
0304-405X(1997)43:2<153:ICOE>2.0.ZU;2-T
Abstract
Estimates of the cost of equity for industries are imprecise. Standard errors of more than 3.0% per year are typical for both the CAPM and t he three-factor model of Fama and French (1993). These large standard errors are the result of(i) uncertainty about true factor risk premium s and (ii) imprecise estimates of the loadings of industries on the ri sk factors. Estimates of the cost of equity for firms and projects are surely even less precise.