Cost of equity in Singapore.

Abstract

Our paper examines the cost of equity in the Singapore market using five different pricing models, namely CAPM, CAPM with size premium, Build-up method, Fama and French three-factor model, and Carhart four-factor model. We seek to find the firm-specific, industry and country-level cost of equity which practitioners can use for valuation purposes. Using data collected from 689 firms listed on the Singapore stock exchange from the 1st June 1989 to 1st October 2009, we find the cost of equity based on different lengths of observation windows. The firm-specific cost of equity varies widely (details available upon request). The range of the industry and country-level cost of equity are 6.36% (Telcom) to 23.69% (Construction) and 8.45% to 13.39% respectively, depending on the models used.