@techreport{NBERw6490,
 title = "Costs of Equity Capital and Model Mispricing",
 author = "Lubos Pastor and Robert F. Stambaugh",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "6490",
 year = "1998",
 month = "April",
 URL = "http://www.nber.org/papers/w6490",
 abstract = {Costs of equity for individual firms are estimated in a Bayesian framework using several factor-based pricing models. Substantial prior uncertainty about mispricing often produces an estimated cost of equity close to that obtained with mispricing precluded, even for a stock whose average return departs significantly from the pricing model's prediction.  Uncertainty about which pricing model to use is less important, on average, than within-model parameter uncertainty.  In the absence of mispricing uncertainty, uncertainty about factor premiums is generally the largest source of overall uncertainty about a firm's cost of equity, although uncertainty about betas is nearly as important.},
}