An evaluation of airline beta values and their application in calculating the cost of equity capital.
Date published
2003-07
Free to read from
Authors
Supervisor/s
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Department
Type
Article
ISSN
0969-6997
Format
Citation
Sheelah Turner and Peter Morrell, An evaluation of airline beta values and their application in calculating the cost of equity capital, Journal of Air Transport Management, Volume 9, Issue 4, July 2003, Pages 201-209.
Abstract
This paper focuses on the calculation of the cost of equity capital in a sample of airlines, in comparison to industry-calculated values. The approach usually taken is to apply the Capital Asset Pricing Model to airline stock prices and market indices. The research shows that the calculated b values are sensitive to the precise methodology and calculations used. Further, the low regression model fits indicate the Capital Asset Pricing Model may not be the most suitable model for b value calculations. The emerging b values are lower than expected, and possible causes of this are discussed.