publication . Article . 2003

An evaluation of airline beta values and their application in calculating the cost of equity capital

Turner, Sheelah; Morrell, Peter;
Open Access
  • Published: 01 Jul 2003 Journal: Journal of Air Transport Management, volume 9, pages 201-209 (issn: 0969-6997, Copyright policy)
  • Publisher: Elsevier BV
  • Country: United Kingdom
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 I² 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 I² value calculations. The emerging I² values are lower than expected, and possible causes of this are discussed.
Subjects
free text keywords: Strategy and Management, Law, Management, Monitoring, Policy and Law, Transportation
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