هزینه سرمایه در بازارهای مالی بین المللی: محلی یا جهانی؟

This paper analyzes to what extent international and domestic asset pricing models lead to a different estimate of the cost of capital for an individual firm under the maintained assumption of perfect international financial integration. We distinguish between (i) the multifactor Solnik–Sercu ICAPM including both the global market portfolio and exchange rate risk premia, and (ii) the single factor domestic CAPM. We use a sample of 3,293 stocks from nine countries in the period 1980–1999. The domestic CAPM yields a significantly different estimate of the cost of capital from the multifactor ICAPM for only five percent of the firms in our sample. We attribute the close correspondence between local and global pricing to strong country factors in individual stock returns, which are probably due to lack of real integration. Our results reinforce the home bias puzzle.

Theory suggests the use of an international CAPM (ICAPM) for computing a firm’s cost of capital in a financially integrated world. In practice, however, a wide variety of asset pricing models that ignore the international dimension is used to compute the cost of capital.1 This may, among other things, be related to the fact that even though the ICAPM is theoretically preferable to the domestic CAPM, a firm’s beta calculated using the domestic CAPM does not necessarily provide an incorrect estimate of the cost of capital. The two asset pricing models could lead to the same cost of capital if the local stock market portfolio contains all the information that is relevant in order to price domestic assets internationally.2 The purpose of this paper is to empirically examine whether international and domestic asset pricing models really lead to a different estimate of the cost of capital. A partial answer is given by Stulz (1995b), who derives an expression for the difference in the estimation of a firm’s beta when computed with the domestic CAPM as compared to the single factor ICAPM of Grauer et al. (1976). Stulz refers to this difference as the pricing error, which is linearly related to the computed cost of capital differential. Stulz uses data on the Swiss multinational Nestlé and finds a substantial pricing error. We generalize the analysis of Stulz (1995b) in three ways. First, we employ the multifactor ICAPM of Solnik (1983) and Sercu (1980) including both the global market portfolio and exchange rate risk premia.3 Second, we derive statistical tests for the significance of the pricing error. Third, we use data on 3,293 stocks from nine different countries to investigate the difference between each of these models empirically.4 We analyze the sample period 1980:02–1999:06. We find that the pricing error in terms of the cost of capital computed with either the domestic CAPM or the multifactor ICAPM of Solnik–Sercu is marginal. Only for about 5 percent of all firms in our sample the domestic CAPM yields a significantly different cost of capital than the multifactor ICAPM at the 95% confidence level. We show that the absolute difference in the cost of capital amounts to about 50 basis points for the US, about 75 basis points for Germany and Japan, and similar amounts for the other countries in our sample. We argue that our findings may be attributed to strong country factors in the individual stock returns, consistent with the evidence of Heston and Rouwenhorst (1994) and Griffin and Karolyi (1998). A tentative explanation of this finding is a lack of real capital market integration, due to both cyclical and structural, and institutional country-specific factors. These closely tie together the fortunes of all firms operating in the same country. The observed differences between countries can and should be used by individual investors for the purpose of portfolio diversification. Diversification across industries within one country is insufficient to cope with a country’s systemic risk according to our results. Our evidence reinforces the home bias puzzle. Testing for a pricing error turns out to be very similar to testing for foreign exchange exposure. We show how both methodologies are related and how pricing error tests can shed light on the well-known puzzle that firms from a variety of data sets show little exposure to exchange rate fluctuations.5 The paper is set up as follows. In Section 2, we review the international CAPM and the domestic CAPM and derive testable hypotheses. In Section 3, the data are described and summary statistics are discussed. Empirical results are presented in Section 4. Section 5 explores the results using a variance decomposition technique. We elaborate on the link between the pricing error tests and the foreign exchange exposure literature in Section 6. Summary and conclusions are presented in Section 7.

While theory suggests the use of an international CAPM in integrated capital markets, the domestic CAPM does not necessarily imply an incorrect estimate of the cost of capital. In this paper, we examine to what extent international and domestic asset pricing models imply a different estimate of the cost of capital for a sample of monthly data for 3,293 firms from nine major industrialized countries from 1980 to 1999. We distinguish between: (i) the multifactor ICAPM of Solnik–Sercu including both the global market portfolio and exchange rate risk premia, and (ii) the single factor domestic CAPM. Our analysis allows for an assessment of what is important in cost of capital computations and what is not. The main results of this paper stem from two time series regressions we run for each individual stock in the sample. First, when we run a regression of the return on an individual stock on the return on the world market index and several exchange rates, we find that a large number of companies are exposed to fluctuations in exchange rates. Foreign exchange exposure is statistically significant for more than 45 percent of the firms in our sample. Second, when we incorporate the domestic market index in this regression, the exposure to exchange rates dissolves for most firms. In fact, both the global market index and the exchange rate factors become insignificant for the vast majority of corporations. The global factors are jointly significant for only approximately 5 percent of the firms in our sample. We draw the following conclusions from this analysis. Firms are exposed to global risk factors, validating an international finance approach to measuring the cost of equity capital. Corporations within a country by and large exhibit a joint exposure to international risk factors. For a large majority of companies, this joint exposure is folly captured in the international pricing of the domestic market index. That is, stock returns are generally dominated by an index of their local currency domestic market index. This finding is corroborated by a variance decomposition analysis. As a result, the systematic risk of a stock implied by the single factor domestic CAPM is very infrequently significantly different from the systematic risk implied by the multifactor ICAPM. The implied cost of capital differential is also small in economic terms. The difference in the estimate of a firm’s systematic risk amounts to around 50 basis points on average for the US, roughly 75 basis points for Germany and Japan, and approximately 100 basis points for France. Independent of the issue whether international capital markets are fully integrated, the domestic CAPM rarely leads to a different estimate of the cost of capital than the multifactor ICAPM. A tentative explanation of this finding is a lack of real capital market integration, due to both cyclical and structural, and institutional country-specific factors. Furthermore, our evidence reinforces the home bias puzzle. Further research is required to examine these issues.