Construction
For each industry we provide historical costs of equity for projects with 1-, 5-, 10- and 20-year horizons. Series are monthly and begin in January 2005.
We compute such costs of equity by first multiplying historical CAPM betas by the US market risk premium and then adding the appropriate real risk-free rate.
CAPM Betas
To estimate the historical CAPM betas of each industry, we run 5-year rolling window regressions of monthly industry excess returns on the monthly market risk factor. (Data from NEFin website)
US Market risk premium
For 1-, 5-, 10- and 20-year horizons, we calculate the US risk premium using averages of past US market excess returns according to the respective horizon. (Data from Robert Shiller's website, http://www.econ.yale.edu/~shiller/data.htm)
Real risk-free rate
Historical real risk-free rates are computed by interpolating the historical yields of NTN-B bonds. (Data from the Tesouro Direto website, http://www.tesouro.fazenda.gov.br/balanco-e-estatisticas)