Estimating the Cost of Equity Capital: An Empirical Analysis in the Tunisian Context

Abstract

The purpose of this article is to look for the suitable model for estimating the cost of equity capital in the Tunisian stock market, using a sample of 26 Tunisian listed firms over the period 2003 to 2010. By conducting a comparative analysis between the CAPM, the three-factor model of Fama and French (1993) and the four-factor pricing model proposed by Carhart (1997), the latter model emerges as one who explains better the returns variations on the Tunisian Stock Exchange. We also conclude to the existence of a growth, small size and contrarian anomalies