The Investment Scientist

Posts Tagged ‘cost of capital

icarra chart

MZ Capital 40/60 model vs S&P 500

Just like two sides of a coin, the capital market is made up of capital demanders (businesses) and capital suppliers (investors). What for businesses are costs of acquiring capital are for investors rewards of supplying it. It is a simple truth that

Costs of Capital = Expected Returns

Looking through this lens, many capital market phenomena can be explained.

Why small stocks tend to have higher returns than large stocks?

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.

Twitter: @mzhuang

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