Competitive Advantage and the Cost of Equity in International Shipping

Pointon, J. and El-Masry, A. (2007). Competitive Advantage and the Cost of Equity in International Shipping, Journal of the Operational Research Society, Vol. 58, pp. 1138-1145

Posted: 16 Nov 2018

See all articles by John Pointon

John Pointon

University of Plymouth

Ahmed A El-Masry

Coventry University Centre for Financial and Corporate Integrity

Date Written: 2007

Abstract

This paper examines the relationship between dividend-based and earnings-based cost of equity capital estimates under temporary competitive advantage. A new insight is that the true cost of equity is shown to approach the geometric mean of the supernormal dividend-based and simple earnings-based estimates, as the mean period of competitive advantage approaches the supernormal payback period. We proceed to analyse the international shipping sector across 14 countries from 1998 to 2005. Although the mean cost of equity is around1 0-11%, there is high variability and non-normality. The cost of equity measures under temporary competitive advantage provide estimates statistically independent of those based on stock market risk.

Keywords: finance, shipping, stochastic processes, competitive advantage

JEL Classification: D24, G32

Suggested Citation

Pointon, John and El-Masry, Ahmed A, Competitive Advantage and the Cost of Equity in International Shipping (2007). Pointon, J. and El-Masry, A. (2007). Competitive Advantage and the Cost of Equity in International Shipping, Journal of the Operational Research Society, Vol. 58, pp. 1138-1145, Available at SSRN: https://ssrn.com/abstract=3257071

John Pointon

University of Plymouth ( email )

Mast House
Plymouth, Devon PL4 8AA
United Kingdom
+44-1752-232826 (Phone)
+44-1752-232853 (Fax)

Ahmed A El-Masry (Contact Author)

Coventry University Centre for Financial and Corporate Integrity ( email )

William Morris Building
Gosford Street
Coventry, CV1 5FB
United Kingdom

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