COST OF CAPITAL IN EMERGING MARKETS: A DOWNSIDE RISK EMPIRICAL APPROACH IN BRAZIL

Authors

  • Graziela Xavier Fortunato Fundação Instituto Capixaba de Pesquisa emContabilidade, Economia e Finanças
  • Luiz Felipe Jacques da Motta Pontifícia Universidade Católica do Rio de Janeiro
  • Giuseppe Russo Pontifícia Universidade Católica do Rio de Janeiro

Keywords:

Emerging markets, Return, Downside risk, CAPM, Cost of capital.

Abstract

This article aims to test empirically the Estrada (2000) proposition for the firms that are part of the Ibovespa, evaluating whether for emerging markets there are systematic risk measures different of beta of the CAPM. Thus, it was tested the downside risk that picks up the negative part of the return. Besides the cross section data, it was used panel data, as an additional contribution to the work of Estrada (2000). The results do not confirm that the downside risk is an appropriate measure for the Brazilian market. Other risk measures presented better correlation to the return, enabling the calculus of the cost of capital with different value than the one obtained by the application of beta. According to Estrada (2000), the results suggest that the emerging markets are in the intermediate position between the integrated and segmented markets, such as confirmed for the Brazilian market.

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Author Biographies

Graziela Xavier Fortunato, Fundação Instituto Capixaba de Pesquisa emContabilidade, Economia e Finanças

Doutora em Administração de Empresas pelo Instituto de Administração e Gerência (IAG) da Pontifícia Universidade Católica do Rio de Janeiro (PUC-RJ). Professora de Finanças da Fundação Instituto Capixaba de Pesquisa em Contabilidade, Economia e Finanças (Fucape).

Luiz Felipe Jacques da Motta, Pontifícia Universidade Católica do Rio de Janeiro

Doutor em Administração de Empresas pela Escola de Administração de Empresas da University of Southern California, Estados Unidos. Professor de Finanças do Departamento de Administração da Pontifícia Universidade Católica do Rio de Janeiro (PUC-RJ).

Giuseppe Russo, Pontifícia Universidade Católica do Rio de Janeiro

Doutor em Administração de Empresas pelo Instituto de Administração e Gerência da Pontifícia Universidade Católica do Rio de Janeiro (PUC-RJ).

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Additional Files

Published

2009-11-02

Issue

Vol. 11 No. 1 (2010)

Section

Strategic Finances

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