International financial markets are becoming integrated. Hence, global
risk factor are increasingly important for portfolio selection and
asset pricing. The recent empirical finance literature has confirmed
that both the global market portfolio and exchange rate risk factors
constitute important determinants of asset returns. We show, however,
that global risk factors do not importantly affect estimates of the
cost of equity capital for a remarkably wide variety of companies. We
analyze almost 3,300 stocks from nine industrialized countries over
the period 1980-1999. Incorporating global factors into cost of
capit
