Cost of Capital and Regulator’s Preferences: Investigation into a new method of estimating regulatory bias

When computing regulated prices, the standard method is the capital asset pricing model (CAPM) which involves the estimation of a single parameter: the beta of the company. Yet, these computational methods fail to take into account any preference the regulator might have to increase or decrease the beta to favour or punish investors or customers. We propose such a methodology based on what we call a Linex linear optimal method.

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Year of publication:	2004-07
Authors:	Sancetta, A. ; Satchell, S.E.
Institutions:	Faculty of Economics, University of Cambridge
Subject:	cost of capital \| CAPM \| linear predictor \| linex

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Extent:	application/pdf
Series:	Cambridge Working Papers in Economics.
Type of publication:	Book / Working Paper
Language:	English
Notes:	EM 2 pages long
Classification:	C13 - Estimation ; L50 - Regulation and Industrial Policy. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005113882