Different methods to estimating the cost of equity. An anlysis on a sample of too big to fail banks
In this study a comparison was made between the Capital Asset Pricing Model, the most widely used methodology, and an actuarial method with the use of Credit default swaps and the method based on the inverse of the multiple P/E. These three models are used to estimate the cost of equity. The comparison was made on a sample of 24 banks selected among the largest for assets in the world (Too big to fail banks) belonging to eleven different countries.