Unlevered betas and the cost of equity capital: An empirical approach

Sarmiento-Sabogal, Julio; Sadeghi, Mehdi

doi:10.1016/j.najef.2014.08.002

Cited by 8 publications

(2 citation statements)

References 60 publications

(77 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…It takes into account that systematic risk is increased when debt is obtained by the company, therefore, leveraged beta is somewhat higher than unleveraged beta (Lesseig & Payne, 2017). Leveraged beta is applied in financial modelling (Sarmiento-Sabogal & Sadeghi, 2014). Unleveraged beta represents a beta measurement through which company debts are ignored.…”

Section: Estimating Systematic Risk In Stock Marketsmentioning

confidence: 99%

Viability of Risk-return Trade-off within a South African Context

Robbetze

Swanepoel

2022

JAI

View full text Add to dashboard Cite

Research aims: This study aimed to determine whether systematic risk and return are related to each other. It answered the research question: Is it realistic for investors to expect high returns when their investments are associated with more riskiness?Design/Methodology/Approach: Quantitative analysis was applied through a correlational research design. Secondary data were collected from the Integrated Real-time Equity System (IRESS). The Statistical Package for Social Sciences (SPSS) was utilised to measure a Pearson correlation coefficient and execute multiple regression analysis. This was done to test for the relationship between financial measurements of systematic risk and return, of sampled entities.Research findings: This research found that measures of systematic risk and return are not necessarily related when empirically analysed for sampled entities.Theoretical contribution/Originality: This paper indicated that the principle of the modern portfolio theory (MPT) should not be accepted as general truth. It should not be assumed that risk and return are linearly related in all financial markets under all economic circumstances. This premise is contrary to general financial management practice, where the MPT is universally accepted and even forms the basis of other financial theories.Research limitation: The use of the IRESS database posed a limitation in terms of sampling, as the database was frequently unable to present a complete set of data needed for statistical testing. Consequently, only 33 companies were sampled, as IRESS only made a complete set of required data available for these entities.

show abstract

Section: Estimating Systematic Risk In Stock Marketsmentioning

confidence: 99%

Viability of Risk-return Trade-off within a South African Context

Robbetze

Swanepoel

2022

JAI

View full text Add to dashboard Cite

show abstract

“…For the incomebased approach, comparable firms, by contrast, only play an indirect role, which is the basis for comparing some criteria of the target company (Figure 2). However, in several cases (e.g., the target firm is a firm with leverage restructure, a newly listed firm, an unlisted firm, or individual business unit), peer firms play a direct role in the income-based approach (Beneda, 2003;Damodaran, 2012;Renzi et al, 2013;Sarmiento-Sabogal & Sadeghi, 2014).…”

Section: Literature Review and The Application Of Valuation Theorymentioning

confidence: 99%

Modeling the selection of comparable firms: A novel approach for business valuation in ASEAN nations

Kim-Duc

Sinh

Bich-Van

2021

Cogent Economics & Finance

View full text Add to dashboard Cite

This study aims to develop systematic models for the selection of comparable firms for firm valuation. The conventional approach argues that indicators such as firm size, growth rate, and industry should be considered for the selection of peer firms. However, this is sometimes very difficult for appraisers because it is almost impossible to find firms that capture all these criteria, especially in developing countries. Guided by business valuation theory, three indicators-profitability, earnings growth rate, and systematic risk-are applied by this study to build systematic models that simultaneously consider the many criteria affecting firm value. Using firm-level data from nonfinancial enterprises with 18,418 firm-year observations collected from the six ASEAN nations' stock exchange markets from 2010 to 2020, this study contributes to business valuation literature by developing systematic models for the selection of comparable firms. The results of this study are also practically significant for valuers because our models can be applied to peer group selection as well. Additional analysis shows that our models are more appropriate or suitable than models from previous conventional approaches that use the same industry or same firm financial characteristics.

show abstract