Ex Ante Cost of Equity Estimates of S&P 500 Firms : The Choice between Global and Domestic CAPM

We estimate ex ante expected returns for a sample of Samp;P 500 firms over the period 1983-1998. The ex ante estimates show a better overall fit with the domestic version of the single-factor CAPM than with the global version, but the difference is small. This finding has no trend in time and is consistent across groups formed on the basis of relative foreign sales. The findings suggest that for estimating the cost of equity, the choice between the domestic and global CAPM may not be a material issue for many large US firms