Abstract
An analysis of factors that affect the discount rates and stock risk of European tourism firms during the period of 2003–2011 finds that macroeconomic variables have the greatest effect. Using the capital asset pricing model (CAPM), the study tests seven macroeconomic variables and seven accounting variables to better understand what most affects a stock price beta. The size of European tourism firms (measured by assets) is the only accounting factor that influences stock risk, while three macroeconomic factors, namely, European gross domestic product growth, exchange rate variation (between the euro and the U.S. dollar), and the profitability of the Dow Jones industrial average, have high explanatory power to predict variation of European companies’ stock risk.