Determining the grant rate in innovation support funds using the capital asset pricing model (CAPM)

Asset pricing models, especially CAPM, are used to determine the expected return on stocks, which is one of the main inputs of valuation using DCF method. Also, setting a rate appropriate to the industry risk, especially for companies that are in the second or subsequent rounds of capital raising, helps to maintain and increase the resources of the facility provider fund. The purpose of this research is to check the possibility of adding a new risk factor based on whether the company is knowledge-based or not to CAPM,. To investigate this, in the first stage (time series regressions) the betas of each portfolio are extracted. In the second stage (cross-sectional regressions) the explainability of the dispersion of the average excess returns of the portfolios using the sensitivity coefficients of each portfolio to the risk factors of the model, is checked. According to the results, being knowledge-based or not is not a new risk factor, but knowledge-based and non-knowledge-based portfolios in the same industries have different CAPM betas. Therefore, it is recommended to use the data of knowledge-based stock companies to find the expected rate of return for a knowledge-based company. Finally, a formula is proposed to relate the expected return found by CAPM to the interest rate of the granted loan.