Associate Professor Martin Lally presented Forward Looking Estimates of the Market Risk Premium at the half-day Regulatory Cost of Capital II: What is the Market Risk Premium? Copies of Martins underlying papers on the topics can be obtained by contacting him at martin.lally@vuw.ac.nz

Dr Martin Lally presented The Impact of Regulation on the Firm's Cost of Capital at the ISCR forum, The Cost of Capital for the Regulated Firm in August 2003

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...

This paper has developed an estimator for a country's market risk premium that involves optimally combining an estimate based upon only local historical data over 100 years and the cross-country average. This paper has also compared the combined estimator to that of its two components, and the...

This paper examines the Vasicek and Blume methods for correcting OLS betas. The primary conclusions are that typical applications of Vasicek's method seem to mistakenly equate the prior distribution with the cross-sectional distribution of estimated rather than true betas, that Blume's implicit...

This paper develops an international CAPM embodying dividend imputation. Two major contrasts with a domestic CAPM are shown: firstly the betas of some assets may significantly change, especially those in small countries; secondly the impact of imputation on the expected return of a local asset...

This paper develops a process for estimating betas which is free of bias arising from changes over the estimation period in the leverage of the firm and/or the leverage of stocks comprising the market proxy. This involves de-levering both firm and market returns, using these to estimate...

For a cost of equity model to conform to the Modigliani-Miller cost of capital propositions, any sensitivity coefficients in the model must be related to the firm's leverage. In this paper I apply these principles to the Fama-French model for the cost of equity and develop the relation between...

Evolving volatility is a dominant feature observed in most financial time series and a key parameter used in option pricing and many other financial risk analyses. A number of methods for non-parametric scale estimation are reviewed and assessed with regard to the stylized features of financial...

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...