A note on the calculation of the risk free rate for tests of asset pricing models and event studies




Mika Vaihekoski

Johan Knif, Bernd Pape

Vaasa

2014

Contributions to Mathematics, Statistics, Econometrics, and Finance: Essays in Honour of Professor Seppo Pynnönen.

ACTA WASAENSIA

296

291

306

16

978-952-476-522-0

978-952-476-523-7

0355-2667

http://www.uva.fi/materiaali/pdf/isbn_978%E2%80%93952%E2%80%93476%E2%80%93523%E2%80%937.pdf



The risk-free rate has a special role in finance theory. It is the key parameter in most asset pricing models and companies’ cost of capital calculations. It is the reference point for risky asset returns, and as such, asset pricing models are typically tested using excess returns. In event studies, it is used when abnormal returns are measured using the excess market model.




Last updated on 2024-26-11 at 12:19