Weighted Average Cost of Capital --Calculating cost of equity in practice I 传 How to estimate B 1 Choice of proxy for the market portfolio 2 Time period:6 months,1 year,5 years or .. 3 Returns:daily,weekly or monthly observations? 4 Use the market model (regression) ke=kr+β(km-k) 5 Reality check does this seem reasonable? -1 usually0<β<2 --2 Market portfolio B 1Weighted Average Cost of Capital --Calculating cost of equity in practice I How to estimate β 1 Choice of proxy for the market portfolio 2 Time period: 6 months, 1 year, 5 years or ... ? 3 Returns: daily, weekly or monthly observations? 4 Use the market model (regression) ke = krf + βj(km – krf) 5 Reality check - does this seem reasonable? --1 usually 0<β<2 --2 Market portfolio β = 1