Real interest rates and the cost of capital

Jenkinson, Tim (1999) Real interest rates and the cost of capital. Oxford Review of Economic Policy, 15 (2). pp. 114-127.


The real interest rate and the equity risk premium are critical economic parameters that influence a wide range of economic decisions. This paper considers the problems involved in estimating expected real interest rates and the equity risk premium, and hence the overall cost of capital. Using UK data, it suggests reasons why estimates based on historical returns may be misleading, and discusses alternative approaches to estimating the cost of capital.

Item Type: Article
Keywords: macroeconomics; financial sector; economic policy
Subject(s): Private equity
Centre: Oxford Private Equity Institute
Faculty of Finance
Date Deposited: 10 Jan 2012 14:43
Last Modified: 23 Oct 2015 14:06

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