Zero-beta risks and required returns: ESG and CAPM

IF 2.9 3区 经济学 Q2 BUSINESS, FINANCE
David Johnstone, Andrew Grant
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引用次数: 0

Abstract

We ask how idiosyncratic zero-beta risks (e.g., the risk of litigation or R&D failing) affect the firm's cost of capital under capital asset pricing model (CAPM). Surprisingly, perhaps, CAPM theory reveals that adding an idiosyncratic risk to the firm's payoff distribution will usually although not necessarily increase the firm's cost of capital. Lintner's famous original CAPM expositions revealed that the firm's CAPM cost of capital is a function of the ratio of the covariance of its cash payoff with the market to its payoff mean. Lintner proved that an idiosyncratic risk that affects the firm's payoff covariance per unit of mean is“priced” in the sense that it necessarily alters the firm's CAPM discount rate. We explain and clarify Lintner's argument using elementary CAPM equations and numerical examples.

Abstract Image

零风险和要求回报:ESG和CAPM
我们要问的是,在资本资产定价模型(CAPM)下,特殊的零贝塔风险(例如,诉讼或研发失败的风险)如何影响公司的资本成本。也许令人惊讶的是,CAPM理论揭示,在公司的收益分配中增加一个特殊风险通常会增加公司的资本成本,尽管不一定会增加。林特纳著名的原始CAPM理论揭示了企业的CAPM资本成本是其现金支付与市场的协方差与其支付均值之比的函数。林特纳证明,影响公司单位平均收益协方差的特殊风险是“定价”的,因为它必然会改变公司的CAPM贴现率。我们用基本的CAPM方程和数值例子来解释和澄清林特纳的论点。
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来源期刊
Financial Management
Financial Management BUSINESS, FINANCE-
CiteScore
6.00
自引率
0.00%
发文量
27
期刊介绍: Financial Management (FM) serves both academics and practitioners concerned with the financial management of nonfinancial businesses, financial institutions, and public or private not-for-profit organizations.
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