Do we need CAPM for capital budgeting?
By: Ravi Jagannathan, Iwan Meier.
Contributors: Meier, Iwan.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper  8719; Working paper series (National Bureau of Economic Research : Online) ;; working paper no.  8719.
Publisher: National Bureau of Economic Research
Published: 2002
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Capital assets pricing model.
Description: "A key input to the capital budgeting process is the cost of capital.  Financial managers most often use the CAPM for estimating the cost of capital for which they need to know the market risk premium.  Textbooks advocate using the historical value for the U.S.  equity premium as the market risk premium.  The CAPM as a model has been seriously challenged in the academic literature.  In addition recent research indicates that the true market risk premium might have been as low as half the historical U.S.  equity premium during the last two decades.  If business finance courses have been teaching the use of the wrong model along with wrong inputs for twenty years, why has no one complained? We provide an answer to this puzzle"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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Mode of access: World Wide Web.