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FOREIGN SALES and US FIRMS ’ COST of EQUITY ESTIMATES: GLOBAL vs LOCAL CAPM

By Walter Dolde, Carmelo Giaccotto, Dev R. Mishra and Thomas J. O’brien

Abstract

ESTIMATES: GLOBAL vs LOCAL CAPM Firms with very high (or very low) exposure to global business conditions should have the highest error in using the local CAPM when the global CAPM is valid. Cost of equity estimates from the local CAPM and global CAPM are compared for 1472 US stocks. Surprisingly, the ratio of foreign-to-total sales did not significantly explain the cost of equity differences between the CAPMs

Year: 2011
OAI identifier: oai:CiteSeerX.psu:10.1.1.197.9211
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