Australian Costs of Equity (2005-2007)

To compute the cost of equity capital one must use an appropriate asset pricing model combined with proper estimation methodology. But it is not clear which asset pricing model should be used for Australian firms. Specifically Australia is an open economy that is largely integrated into the world market but it is also small with relatively few listed firms in some industry segments. This has implications for the way Australian firms should be valued against international benchmarks and for how international data should be used in computing appropriate returns for Australian firms. These issues which are largely ignored in the U.S.-dominated international literature will be examined in this project