Determining the risk-free rate for applying the CAPM in the brazilian market

Authors

DOI:

https://doi.org/10.5965/2316419003042014001

Keywords:

risk-free rate, CAPM, risk aversion , flight to quality

Abstract

The adaptation of CAPM (Capital Asset Pricing Model) to Brazilian market has been subject for several academic papers. One of the aspects related to the subject refers to the parameterization of the risk-free rate (Rf), usually oscillating in the literature between the Poupança Yield, the Selic rate and the yield from US treasury bonds. The following paper aimed to discover which of these constructs has the better fit to the CAPM’s risk free rate in Brazil. Basing on the flight to quality phenomena, we compared the behavior of Ibovespa with the behavior of these constructs. The conclusion is that, although all presented significant correlation with Ibovespa, the quality to explain the Ibovespa performance was better for the US treasury bonds, classifying it as the recommended asset to the risk-free rate in Brazil.

Downloads

Download data is not yet available.

Author Biographies

Pedro Guilherme Ribeiro Piccoli, Pontifical Catholic University of Paraná, PUC/PR, Brazil.

PhD in Business Administration from the Pontifical Catholic University of Paraná, PUC/PR, Brazil.

June Alisson Westarb Cruz, Pontifical Catholic University of Paraná, PUC/PR, Brazil.

Postdoctoral fellow from the Getúlio Vargas Foundation - EAESP, FGV EAESP, Brazil.

PhD in Business Administration from the Pontifical Catholic University of Paraná, PUC/PR, Brazil.

Has a Master’s degree in Business Administration from the Pontifical Catholic University of Paraná, PUC/PR, Brazil.

Specialist in Inorganic Chemistry from the Paraná Federal University (UFPR).

Graduated in Accounting Sciences at the Franciscan University Center, UNIFAE, Brazil.

Professor at the Pontifical Catholic University of Paraná, PUC/PR, Brazil.

References

ASSAF NETO, A.; LIMA, F. G.; ARAÚJO, A. M. P. DE. Uma proposta metodológica para o cálculo do custo de capital no Brasil. R. Adm., São Paulo, v.43, n.1, p.72-83, jan./fev./mar. 2008.

BLACK, F.; JENSEN, M. e SCHOLES, M. The Capital Asset Pricing Model: Some Empirical Tests. Studies in The Theory of Capital Markets, 1972.

BANCO CENTRAL DO BRASIL. Disponível em: www.bcb.gov.br. Acesso em 20.09.2013

COPELAND, T. E.; WESTON, J. F. Financial Theory and Corporate Policy. 3rd Ed. EUA: Addison Wiley Publishing Company, 1988.

DAMODARAN, A. Estimating Equity Risk Premiuns. Stern School of Business. New York, 1999.

FAMA, E. F. e FRENCH, K. R. The Cross-Section of Expected Stock Returns. The Journal of Finance. v.67, n. 2, 1992.

FAMA, E. F.; FRENCH, K. R. The Capital Asset Pricing Model: Theory and Evidence. Journal of Economic Perspectives. V. 18, N.3, p.25-p.46, 2004.

MÖLLER, H. D.; CALLADO, A. A. C. Fluxos de capital no Brasil pós-Plano Real. Faces, v. 3, n. 2, p. 73-86, 2004.

MORTELANC, R.; TRIZI, J. S.; PACHECO, A. PASIN, R. Utilização de metodologia de avaliação de empresas: resultados de uma pesquisa no Brasil, VIII Semead, 2005.

MUNHOZ, V. C. V. Vulnerabilidade externa e controle de capitais no Brasil: uma análise das inter-relações entre câmbio, fluxos de capitais, IOF, juros e risco-país. Nova Economia, v. 23, n.1, p. 371-402, 2013

OLIVEIRA, S. L. Tratado de Metodologia Científica: Projetos de Pesquisas, TGI, TCC, Monografias, Dissertações e Teses. Pioneira, São Paulo, SP, 2002.

PEREIRO, L. E. The practice of investment valuation in emerging markets: Evidence from Argentina. Journal of Multinational Financial Management, v. 16, n. 2, p. 160-183, 2006

ROLL, R.; ROSS, S. A. On the Cross Sectional Relation between Expected Returns and Betas. The Journal of Finance. v. 49, n. 1, Mar 1994.

ROSS, S. A., The Arbitrage Theory of Capital Asset Pricing. Journal of Economic Theory, v. 13, n.3, p. 341-360, 1976.

ROSS, S. A; WESTERFIELD, R. W; JAFFE, J. F. Administração financeira: corporate finance. 2. ed. São Paulo: Atlas, 2007.

SANVICENTE, A. Z. e MINARDI, A. F. Problemas de Estimação do Custo de Capital no Brasil. Ibemec Business School, São Paulo, 1999.

SHARPE, W. F. Capital Asset Market Prices : A Theory of Market Equilibrium Under Conditions of Risk. The Journal of Finance, v. 19, n. 3, 1964.

SILVEIRA, H. P., BARROS, L. A., FAMÁ, R. Aspectos da Teoria de Portfolios em Mercados Emergentes: Uma Análise de Aproximações para a Taxa Livre de Risco no Brasil. VI SEMEAD, 2003.

SILVEIRA, H.; FAMÁ, R.; BARROS, L. Conceito De Taxa Livre De Risco E Sua Aplicação No Capital Asset Pricing Model. – Um Estudo Exploratório Para O Mercado Brasileiro. Encontro Brasileiro de Finanças, 2010.

TOBIN, J. Liquidity Preference as Behavior Toward Risk. Review of Economics Studies. Fev, 1958.

TOMAZONI, T.; MENEZES, E. A. Estimativa do custo de capital de empresas brasileiras de capital fechado. Revista de Administração da USP, v.37, n.4, p.38-48, out/dez 2002.

U.S. DEPARTMENT OF THE TREASURY. Disponível em: www.treasury.gov. Acesso em 25.09.2013.

Downloads

Published

2014-12-23

How to Cite

Piccoli, P. G. R., Cruz, J. A. W., & Citadin, M. W. (2014). Determining the risk-free rate for applying the CAPM in the brazilian market. Revista Brasileira De Contabilidade E Gestão, 3(6), 01–11. https://doi.org/10.5965/2316419003042014001

Issue

Vol. 3 No. 6 (2014)

Section

Articles

License

Copyright (c) 2015 Pedro Guilherme Ribeiro Piccoli, June Alisson Westarb Cruz, Michael Willian Citadin

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Brazilian Journal of Accounting and Management offers free and immediate access to its content, following the principle that providing scientifical knowledge in a free manner promotes a better world democratization of knowledge. Authors maintain copyright of articles and grant to the journal the rights of the first publication, according to the Creative Commons Attribution licensing criteria, which allows the work to be shared with initial publication and authorship recognition. These licenses allow others to distribute, remix, adapt, or create derived work, even if it is for commercial purposes, provided that the credit is given to the original creation.