Original Articles

Market segmentation and the cost of equity of companies listed on the Johannesburg Stock Exchange


The segmentation between the Resources/Mining and the Financial and Industrial sectors on the Johannesburg stock exchange and the relative historical dominance of the Mining sector in relation to other international markets poses questions about whether the All share data or the Financial and Industrial data should be used in determining the parameters for the Capital Asset Pricing Model. In this study we test whether the two sectors provide different results, examine those results for magnitude and pattern, and whether they are related to each other. We find that the results are different, the magnitude is material for decision-making, and they are related. These findings will enhance the ability of corporate management to apply judgement in calculating the cost of equity capital.

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