Turning down the volume: estimating cost of capital in the presence of noise

Equity beta is a key input in cost of capital determination. As estimates of beta can be significantly influenced by ‘noise’ in the data, sophisticated ways of dealing with this are valuable in areas such as regulation and litigation. This article outlines an effective beta estimation technique for such data, and also looks at more generalised techniques, such as the Kalman filter, that can be applied in such situations

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Unscripted drama: vertical issues raised in European pay-TV mergers

A number of European mergers in the telecoms sector, including Liberty Global/Corelio/W&W/De Vijver Media and Liberty Global/Discovery/All3Media , have led to the convergence of traditional pay-TV and Internet service providers with TV channel providers and content producers. What vertical competition issues have these transactions raised with respect to the creation and distribution of content by production houses and channel providers?

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Index-linked bonds 2.0: introducing CPI-linked securities

The first ever CPI-linked bond in June 2015 heralds a milestone in UK capital markets. It follows calls for the Office for National Statistics (ONS) to make the consumer price index (CPI) the UK’s headline measure of inflation, and for regulators to cease using the retail price index (RPI) in setting charges for utilities. What does this imply for the future of index-linked gilts, and how might it affect RPI - X regulation?

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Behavioural economics and financial market regulation: practical policy, rigorous methods

Behavioural economics helps us to understand how consumers make choices and why they make choices that are not in their best interests. This allows firms and regulators to diagnose behavioural problems in markets and to design and test solutions. Stefan Hunt and Darragh Kelly, of the Behavioural Economics and Data Science Unit at the UK Financial Conduct Authority (FCA), discuss how the FCA is using innovative methods to build real evidence on consumer behaviour into policymaking and make financial regulation more effective

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