Market structure and the cost of capital

We contribute to the finance literature in two main ways. First, we present a theoretical capital asset pricing model (CAPM) to price assets in different market structures. Second, we use our model to analyze whether when markets are partially segmented using the local or the global CAPM yields significant errors in the estimation of the cost of capital for a sample of firms from developed and emerging countries.

► We present a model to price assets in different market structures. ► Our model nests other models that have been developed in the literature as special cases. ► We apply our model to examine errors in the estimation of the cost of capital of firms.