Industry costs of equity
Eugene F. Fama, Kenneth R. French
Journal of Financial Economics · 1997 · 6,236 citationsOpen access
Abstract
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 the three-factor model of Fama and French (1993). These large standard errors are the result of(i) uncertainty about true factor risk premiums and (ii) imp ecise estimates of the loadings of industries on the risk factors. Estimates of the cost of equity for firms and projects are surely even less precise.
Cite this paper
Fama, E. F., & French, K. R. (1997). Industry costs of equity. Journal of Financial Economics, 43(2), 153–193. https://doi.org/10.1016/s0304-405x(96)00896-3
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