The Global CAPM and a Firm's Cost of Capital in Different Currencies
In an integrated global market, a firm's cost of capital expressed in one currency should be consistent with its cost of capital expressed in another currency. This article presents and illustrates a process for estimating consistent costs of capital in different currencies for a U.K. based multinational. In so doing, it uses a simple, easy-to-use version of the global CAPM that attempts to incorporate the effect of uncertain exchange rates by calculating exchange rate "betas." As argued in the previous article, at least part of a company's currency exposure is systematically related to the global market and thus should be treated as a component of the firm's systematic equity risk. 1999 Morgan Stanley.
Year of publication: |
1999
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Authors: | O'Brien, Thomas J. |
Published in: |
Journal of Applied Corporate Finance. - Morgan Stanley, ISSN 1078-1196. - Vol. 12.1999, 3, p. 73-79
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Publisher: |
Morgan Stanley |
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