The downside risk approach to cost of equity determination for Slovenian, Croatian and Serbian capital markets

Momčilović, Mirela; Zivkov, Dejan; Begović, Sanja Vlaović

doi:10.15240/tul/001/2017-3-010

Cited by 4 publications

(6 citation statements)

References 22 publications

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“…Average monthly realized rates of return for most stocks and indexes are negative, which speaks about the presence of a bear market at BSE and the possible negative influence of the COVID-19 crisis. Obtained results are similar to results in the study of Momcilovic, Zivkov and Vlaovic Begovic (2017).…”

Section: Research Resultssupporting

confidence: 88%

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Research of the relationship between the weighted average cost of capital and selected profitability ratios of companies in the Republic of Serbia

Momčilović¹,

Vlaović-Begović²,

Wingate³

2021

Int J Econ Practice & Policy

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The weighted average cost of capital (WACC) is determined as the weighted average cost of capital of all long-term sources of corporate financing. WACC is used as a discount rate when determining the value of a company, then in investment analysis when making a decision to accept/reject a project, as well as when evaluating the performance of top management. The paper calculates the WACC for all non-financial corporations that make up the basket of the Belex15 index and then examines the relationship between the weighted average cost of capital and the profitability ratios numbers ROA, ROE and net profit margin. The research results show that the WACC ranges between 3.45% and 17.77% for the sample companies. Also, the results show a negative correlation between WACC on one and selected profitability ratios on the other hand. However, it should be noted that this relationship is statistically significant only between WACC and net profit margin.

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Section: Research Resultssupporting

confidence: 88%

“…Emerging market's returns rates are characterized by high volatility, which is measured with a standard deviation of monthly rates of return (Bekaert & Harvey, 2002;Bekaert & Harvey, 2014;Momcilovic et al, 2017). Standard deviations of monthly realized rates of return in this study are not so high (except for stock AERO).…”

Section: Research Resultsmentioning

confidence: 72%

Research of the relationship between the weighted average cost of capital and selected profitability ratios of companies in the Republic of Serbia

Momčilović¹,

Vlaović-Begović²,

Wingate³

2021

Int J Econ Practice & Policy

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“…According to Momcilovic et al (2017), CAPM is one of the best methods for calculating alternative costs of equity, which is also confirmed by the results obtained within this research. This approach can be used for the mining industry but also for any selected sector in the Czech Republic and abroad, but only provided that the necessary input data for the calculation are available and traceable.…”

Section: Entrepreneurship and Sustainability Issuessupporting

confidence: 83%

“…The performance of the CAPM seems to be quite sensitive to the selected weight matrix (Shi, 2022). In developed countries, the CAPM model is the most commonly used model for determining the costs of equity; on the other hand, there is no consensus concerning the selection of the most suitable model that would be easily applicable for estimating the costs of equity (Momcilovic et al, 2017). The decision on investment and consumption in several periods exposes a company to time-varying risks related to economic cycles and market volatility.…”

Section: Literature Reviewmentioning

confidence: 99%

Alternative costs of equity of coal mining companies taking into account a context of the Russian Invasion into Ukraine

Matasová¹,

Vochоzka²,

Rowland³

2022

JESI

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The aim of work was to evaluate the alternative costs of equity of mining companies in the Czech Republic from 2011 to 2021 and to predict the development of costs structure of equity in the following five years. The calculation of Capital Asset Pricing Model (CAMP) model was selected to deal with the issue of alternative costs of equity in the monitored period and multi-layer perceptron networks were selected for the prediction of development. The achieved results clearly demonstrate the ratio of capital structure and its prediction in the future. The research is useful for energy enterprises and a possibility to use it in another sector is obvious.

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“…Its results also imply that in emerging markets, the diversifiable risk should be priced. Extensive research in emerging markets, such as those of Slovenia, Croatia, and Serbia, demonstrated that the downside risk is the variable that statistically and significantly explained mean returns [37].…”

Section: Literature Reviewmentioning

confidence: 99%

Accounting and Market Risk Measures of Polish Energy Companies

Rutkowska-Ziarko

Markowski

2022

Energies

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Companies in the energy sector, due to their important role in the economy and the specificity of energy sources, are exposed to many types of risk, ranging from the risk associated with the company’s operations and the global economic and political situation in the world. Energy companies are usually large capital companies whose shares are listed on the stock market. The mentioned risk factors may shape the risk level of these companies. The study aims to examine the relationship between market and accounting risk measures for Polish energy companies listed on the Warsaw Stock Exchange. This paper uses market and accounting betas in the conventional and downside approach. In addition to market measures of total risk, it also examines the variability of ROA for energy companies. The study of the relationship between market risk measures and accounting risk measures was based on Pearson’s correlation coefficient, standard linear regression, and quantile regression. The relationship between market and accounting measures of total and systematic risk was identified. Moreover, quantile regressions revealed that the slope for accounting variables varies across the quantiles. Our research shows that for energy companies not listed on the capital markets, for which no market risk measures can be derived, accounting betas and downside accounting can be useful tools in risk analysis. The contribution of the article to the risk analysis of energy companies is the use of unpopular accounting beta factors and a new modification of these coefficients for downside risk.

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The downside risk approach to cost of equity determination for Slovenian, Croatian and Serbian capital markets

Cited by 4 publications

References 22 publications

Research of the relationship between the weighted average cost of capital and selected profitability ratios of companies in the Republic of Serbia

Research of the relationship between the weighted average cost of capital and selected profitability ratios of companies in the Republic of Serbia

Alternative costs of equity of coal mining companies taking into account a context of the Russian Invasion into Ukraine

Accounting and Market Risk Measures of Polish Energy Companies

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