Differences on the Cost of Equity Capital Estimation Using Analysts' Forecasts for the Brazilian Market

Abstract

Using four academically recognized valuation models, we analyze the cost of equity capital on an implicit approach, using analysts’ forecasts for the Brazilian market, in order to complete the variables on the account-based models. The hypothesis in the present paper consists on the convergence of the models, as they have the same premises and little differences on the adjustments used by their creators. However, this hypothesis does not seem to be sustainable when observing all the market, i.e. all industry sectors, in the same sample. The results show that the models can indeed converge, but in a specific industry sector, which in the present paper is the financial sector. Keywords: Cost of capital, Cost of equity, Finance.