New model for cost of equity evaluation in emerging markets: The telecommunication sector in Brazil

This paper proposes a new model for evaluating cost of capital in emerging markets. This model stands out by an index that weights country risk premium, on the assumption that emerging markets are partially integrated and where investors from those markets have a globally diversified portfolio. The index created under the proposed new model for evaluating cost of capital seeks to capture the potential of each asset to the risk diversification of a global market´s portfolio. The index is calculated using shares of telecommunication sectors of Brazil. The results show that the index created (Pod) to compose the model is consistent with the potential of each asset of the telecommunications sector to diversify risks of a global portfolio.