The Role of Macroeconomic Factors in Explaining the Cost of Capital: Evidence from a Group of Emerging Economies

Abstract

This study analyzes the dynamic relationship between the cost of capital and macroeconomic factors for a group of emerging markets spanning the period 1996-2009 and using the GMM estimator methodology, suggested in Arellano and Bond (1991). The empirical findings indicate that these macroeconomic factors play a significant role in explaining the cost of capital in the emerging markets.