Brown, Stephen J.; Lajbcygier, Paul; Wong, Woon Weng - In: Journal of Banking & Finance 36 (2012) 11, pp. 3071-3079
Instead of using industry groups or asset pricing models to estimate the cost of capital we propose using risk equivalent classes known as basis assets. A basis asset is constructed by grouping firms together whose returns indicate they share a common risk exposure, which in theory permits a...