A new paper has been posted on the website of the Social Science Research Network (SSRN): “The Cost of Capital of the Financial Sector,” by Tobias Adrian (Federal Reserve Bank of New York), Evan Friedman (Columbia University), and Tyler Muir (Yale University). The authors propose a five-factor asset pricing model that complements the standard Fama and French three-factor model with a financial sector ROE factor (FROE) and the spread between the financial sector and the market return.