{"id":46,"date":"2021-05-07T03:53:11","date_gmt":"2021-05-07T03:53:11","guid":{"rendered":"http:\/\/mclelland-financial-economics.com\/?p=46"},"modified":"2021-05-10T01:37:36","modified_gmt":"2021-05-10T01:37:36","slug":"international-cost-of-capital-estimation","status":"publish","type":"post","link":"https:\/\/mclelland-financial-economics.com\/?p=46","title":{"rendered":"International cost of capital estimation"},"content":{"rendered":"\n
\"\"
“Hongs at Canton” Unknown (c. 1820)<\/figcaption><\/figure>\n\n\n\n

You are a well-trained finance professional working in a globalized capital market environment. You need to know the basics of estimating international cost of capital<\/em>. All that is required to develop accurate, reliable estimates of international cost of capital is captured in just four equations based on a well-known theory<\/a> by a well-known economist<\/a> 40 years ago. And yet<\/em> \u2026<\/p>\n\n\n\n

The writings of well-known authorities on international cost of capital (ICC) estimation\u2013Campbell Harvey<\/a>, Aswath Damodaran<\/a>, and Roger Grabowski<\/a>\u2013suggest there are four fundamental and interrelated problems with existing ICC estimation methods:<\/p>\n\n\n\n

(1) Lack of coherent theory and methods for pricing cross-border risks.
(2) Use of ad hoc risk premiums based on assumptions; not estimates.
(3) Use of nominal risk-free rates on assets that are demonstrably risky.
(4) ICC estimates that are not clearly opportunity costs of capital<\/em>. <\/strong><\/p>\n\n\n\n

All finance professionals involved in cross-border, international asset valuation will no doubt want to consider how these problems can be solved \u2026 using a method that has existed for about 40 years.<\/strong>  <\/p>\n\n\n\n

Please read on here:<\/p>\n\n\n\n

McLelland, Malcolm, 2018, \u201cInternational cost of capital estimation: The no-arbitrage method\u201d available online<\/strong> Social Sciences Research Network<\/em>.<\/a><\/p>\n\n\n\n

MMc
S\u00e3o Paulo<\/p>\n\n\n\n

Caveats.<\/strong>  Please note: (i) views presented above are my own and do not reflect those of others; (ii) like anyone, I\u2019m not infallible and am responsible for any errors; (iii) I greatly appreciate being informed of any significant errors in facts, logic, or inferences and am happy to give credit to anyone doing so; (iv) the above article is subject to revision and correction; and, (v) the article cannot be construed as investment or financial advice and is intended merely for educational purposes.  MMc<\/em><\/p>\n\n\n","protected":false},"excerpt":{"rendered":"

You are a well-trained finance professional working in a globalized capital market environment. You need to know the basics of estimating international cost of capital. All that is required to develop accurate, reliable estimates of international…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-46","post","type-post","status-publish","format-standard","hentry","category-9-other"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=\/wp\/v2\/posts\/46","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=46"}],"version-history":[{"count":7,"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=\/wp\/v2\/posts\/46\/revisions"}],"predecessor-version":[{"id":60,"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=\/wp\/v2\/posts\/46\/revisions\/60"}],"wp:attachment":[{"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=46"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=46"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mclelland-financial-economics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=46"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}