This paper examines four issues associated with the Officer model, in the context of estimating the cost of equity capital for regulatory purposes. The conclusions are thus. First, regarding the issue of foreign investors, continued use of a version of the Capital Asset Pricing Model that...

In estimating a firm's cost of equity with the CAPM the standard procedure is to proxy the market portfolio by a share index. Since this index is not the market portfolio this may give rise to a bias in estimating the firm's cost of equity. This paper investigates this bias and concludes that it...

There seems to be a widely held view or suspicion in New Zealand that this country's real cost of capital is high, and that this obstructs investment and/or places New Zealand firms at a disadvantage to foreign competitors. Motivated by these concerns this paper examines the following...

This paper shows that, when as usual the market portfolio is proxied by a share portfolio, then the conventional Ibbotson (1999) estimator of the market risk premium violates Miller-Modigliani (1958 and 1963) propositions II and III. A new estimator of the market risk premium is proposed which...

This paper examines the relationship between the market weight of a single stock and the betas of both that stock and the residual portfolio. Theory suggests that the effect of such a large weight is to significantly reduce the beta of the residual portfolio, and it may also significantly raise...