Abstract:

In this paper, the cost of equities of the companies listed in the BISTTRZM index in BORSAİSTANBUL were computed by using models which are based on the Capital Asset Pricing Model (CAPM). The results of models using local data were compared with the results of models using global data. Thus the effect of Turkey’s integration of international capital market on the cost of equity was measured. Local and Global Capital Asset Pricing Model (CAPM), Multifactor Global CAPM, Bekaert – Harvey Mixture Model, Goldman Model, Harvey – Viskanta Model, Damadoran Model, Ibbotson Model, CSFB Model and Erb – Harvey – Viskanta Model were used to compute the firms’ cost of equity. First, the cost of equity of all firms was computed at only one time point and also was computed for time varying cost of equity but only using the Global CAPM and Bekaert – Harvey Mixture Model. All data used includes June 2008 – June 2013. First, the results that we have reached show that Local Models cannot be used for Turkey. It seems that the models which take into account the market’s integration level produce more realistic results than others. Finally, it was found that the Bekaert Harvey Mixture Model which provides the time varying effect on cost of equity is the best model for Turkey.

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