In this paper the cost of capital of the UK's newly privatized utilities is estimated using both the CAPM and the APT. It is found that the APT provides a better description of excess security returns than the CAPM. However, neither model can explain the crosssection of excess returns on the...

In this paper we test the robustness of the CAPM to two alternative estimation procedures: the Fama and MacBeth (1973) two-step methodology; and the one-step methodology due to Burmeister and McElroy (1988). For the UK stock market we find that we can clearly reject the CAPM when the two-step...