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We argue that the empirical evidence against the Capital Asset Pricing Model (CAPM) based on stock returns does not invalidate its use for estimating the cost of capital for projects in making capital budgeting decisions. Since stocks are backed not only by projects in place, but also the...
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Illiquidity measures appear to be related to monthly realized returns but do they impact long-run costs of capital (CoC … do not find evidence that liquidity risk and the probability of informed trade influence CoC. Overall, our results …
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