Finance Commons^™

The Equity Beta Of Telcos Operating In Small Island Nations, Bruno E. Viani

Bruno E. Viani

Analysts often use the capital assets pricing model (CAPM) to estimate the cost of equity capital. A key parameter in estimating that cost is the so-called equity beta. Estimates of equity betas for telecommunications firms, or telcos, in small island nations are not readily available, so analysts often rely on estimated equity betas from larger firms in jurisdictions with much larger markets. Doing so may introduce significant errors if the equity risk premium for telcos in large markets differs significantly from those in small markets. In this research note we explore this hypothesis. We find that the equity betas of …