Freedom Indices and Capital Asset Pricing Model: Some Malaysian Evidence

Human rights and fundamental freedoms such as economic, political, and press freedoms vary widely from country to country. It creates opportunity and risk in investment decisions. Thus, this study is carried out to examine if the explanatory power of the model for capital asset pricing could be improved when these human rights movement indices are included in the model. The sample for this study comprises of 495 stocks listed in Bursa Malaysia, covering the sampling period from 2003 to 2013. The model applied in this study employed the pooled ordinary least square regression estimation. In addition, the robustness of the model is tested by using firm size as a controlled variable. The findings show that market beta as well as the economic and press freedom indices could explain the cross-sectional stock returns of the Malaysian stock market. By controlling the firm size, it adds marginally to the explanation of the extended CAP model which incorporated economic, political, and press freedom indices

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The role of efficiency in capital asset pricing: a research on Nasdaq technology sector

Managerial Finance ◽

10.1108/mf-12-2019-0612 ◽

2020 ◽

Vol 46 (11) ◽

pp. 1479-1493

Author(s):

Hakan Aygoren ◽

Emrah Balkan

Keyword(s):

Asset Pricing ◽

Stock Returns ◽

Factor Model ◽

Explanatory Power ◽

Efficiency Factor ◽

Capital Asset Pricing ◽

Capital Asset ◽

Content Type ◽

The Impact ◽

Three Factor

PurposeThe aim of this study is to investigate the role of efficiency in capital asset pricing. The paper explores the impact of a four-factor model that involves an efficiency factor on the returns of Nasdaq technology firms.Design/methodology/approachThe paper relies on data of 147 firms from July 2007 to June 2017 to examine the impact of efficiency on stock returns. The performances of the capital asset pricing model (CAPM), Fama–French three-factor model and the proposed four-factor model are evaluated based on the time series regression method. The parameters such as the GRS F-statistic and adjusted R² are used to compare the relative performances of all models.FindingsThe results show that all factors of the models are found to be valid in asset pricing. Also, the paper provides evidence that the explanatory power of the proposed four-factor model outperforms the explanatory power of the CAPM and Fama–French three-factor model.Originality/valueUnlike most asset pricing studies, this paper presents a new asset pricing model by adding the efficiency factor to the Fama–French three-factor model. It is documented that the efficiency factor increases the predictive ability of stock returns. Evidence implies that investors consider efficiency as one of the main factors in pricing their assets.

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Capital Asset Pricing Model (CAPM) and the Douala Stock Exchange

International Journal of Financial Research ◽

10.5430/ijfr.v11n5p191 ◽

2020 ◽

Vol 11 (5) ◽

pp. 191

Author(s):

Amenawo Ikpa Offiong ◽

Hodo Bassey Riman ◽

Helen Walter Mboto ◽

Eyo Itam Eyo ◽

Diana Gembom Punah

Keyword(s):

Asset Pricing ◽

Stock Returns ◽

Stock Exchange ◽

Least Square ◽

Capital Asset Pricing Model ◽

Capital Asset Pricing ◽

Pricing Model ◽

Capital Asset ◽

Asset Pricing Model ◽

Asset Portfolio

This study examines if the Capital Asset Pricing Model (CAPM) can be applied to the Douala Stock Exchange. The study utilized monthly stock returns from the three companies listed on the Douala Stock Exchange (DSX), for the period 30th April 2009 to 31st August 2017. Ordinary Least Square regression analysis was adopted for the study to examine if individual stocks can predict a better stock beta. The Black, Jensen, and Scholes (1972) CAPM version were also examined in this study to assess the validity of the zero beta estimate. The result of the individual estimates could not establish the validity of the CAPM theory. Further analysis showed that the Beta for the three assets combined portfolio was not statistically significant. However, when two securities were combined into a single asset portfolio, the portfolio bêta was statistically significant. The significant result of the two asset portfolio confirms that Beta was a linear function of security returns in the DSX market. The study concludes that there will be a need for the government of Cameroun to liberalize the DSX market and allow more firms to be quoted on the floor of the exchange. This decision will allow for the deepening of the DSX market, enhance the liquidity level of the market, and enable investors to reap adequate returns from their investment through holding a portfolio of assets.

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Rolling regression technique and cross-sectional regression: A tool to analyze Capital Asset Pricing Model

Investment Management and Financial Innovations ◽

10.21511/imfi.18(4).2021.21 ◽

2021 ◽

Vol 18 (4) ◽

pp. 241-251

Author(s):

Soumya Shetty ◽

Janet Jyothi Dsouza ◽

Iqbal Thonse Hawaldar

Keyword(s):

Asset Pricing ◽

Stock Returns ◽

Capital Asset Pricing Model ◽

Capital Asset Pricing ◽

Pricing Model ◽

Capital Asset ◽

Cross Sectional ◽

Asset Pricing Model ◽

Business Environments ◽

Rolling Regression

The Capital Asset Pricing Model (henceforth, CAPM) is considered an extensively used technique to approximate asset pricing in the field of finance. The CAPM holds the power to explicate stock movements by means of its sole factor that is beta co-efficient. This study focuses on the application of rolling regression and cross-sectional regression techniques on Indian BSE 30 stocks. The study examines the risk-return analysis by using this modern technique. The applicability of these techniques is being viewed in changing business environments. These techniques help to find the effect of selected variables on average stock returns. A rolling regression study rolls the data for changing the windows for every 3-month period for three years. The study modifies the model with and without intercept values. This has been applied to the monthly prices of 30 BSE stocks. The study period is from January 2009 to December 2018. The study revealed that beta is a good predictor for analyzing stock returns, but not the intercept values in the developed model. On the other hand, applying cross-section regression accepts the null hypothesis. α, β, β2 ≠ 0. Therefore, a researcher is faced with the task of finding limitations of each methodology and bringing the best output in the model.

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Comparative analysis of the explanatory power of the CAPM and the Fama-French three-factor model on cross-sectional variation of returns on stocks trading on the Official market of the Macedonian Stock exchange

Economy, Business and Development: An International Journal ◽

10.47063/ebd.00002 ◽

2021 ◽

Vol 2 (1) ◽

pp. 1-11

Author(s):

Fatmir Besimi ◽

◽

Ana Bisheva

Keyword(s):

Stock Returns ◽

Factor Model ◽

Stock Exchange ◽

Explanatory Power ◽

Capital Asset Pricing ◽

Capital Asset ◽

Cross Sectional ◽

Asset Pricing Model ◽

The Cross ◽

Three Factor

The amount of literature on factors that explain the cross-sectional variation in average returns is vast, however, the majority of these papers attempt to explain the variation of returns in developed and emerging markets. In that sense, the literature lacks sufficient evidence regarding the variation of returns of frontier markets. The Republic of North Macedonia is considered to be a frontier market and in this paper we aim to empirically test the ability of the Capital Asset Pricing Model and the Fama-French Three Factor Model in explaining the cross-sectional variations of stock returns of securities trading on the Macedonian Stock Exchange. The empirical study is based on monthly returns from January 2011 to April 2021. Additionally, we use annual data obtained from the financial statements of the analysed companies included in this study. Using OLS time series regression we find that both models have limited explanatory power of the cross-sectional variation in expected returns on the Macedonian Stock Exchange. The study shows that only the size factor exhibits some limited explanatory power regarding stock returns. Based on the comparative analysis the Fama-French Three-Factor Model describes the variation of returns on the MSE much better than the Capital Asset Pricing Model.

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Patent Thickets, Stock Returns, and Conditional CAPM

Management Science ◽

10.1287/mnsc.2021.4229 ◽

2022 ◽

Author(s):

Po-Hsuan Hsu ◽

Hsiao-Hui Lee ◽

Tong Zhou

Keyword(s):

Asset Pricing ◽

Stock Returns ◽

Capital Asset Pricing ◽

Stochastic Discount Factor ◽

Aggregate Productivity ◽

Capital Asset ◽

Conditional Capm ◽

Asset Pricing Model ◽

Patent Rights ◽

Patent Thickets

Patent thickets, a phenomenon of fragmented ownership of overlapping patent rights, hamper firms’ commercialization of patents and thus deliver asset pricing implications. We show that firms with deeper patent thickets are involved in more patent litigations, launch fewer new products, and become less profitable in the future. These firms are also associated with lower subsequent stock returns, which can be explained by a conditional Capital Asset Pricing Model (CAPM) based on a general equilibrium model that features heterogeneous market betas conditional on time-varying aggregate productivity. This explanation is supported by further evidence from factor regressions and stochastic discount factor tests. This paper was accepted by Karl Diether, finance.

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COULD DYNAMIC BETA MEASURES ENHANCE PERFORMANCE OF CAPITAL-ASSET-PRICING MODEL ON FITTING STOCK RETURNS? A REALITY TEST

Manchester School ◽

10.1111/j.1467-9957.2009.02161.x ◽

2010 ◽

Vol 79 (3) ◽

pp. 349-366

Author(s):

MING-YUAN LEON LI

Keyword(s):

Asset Pricing ◽

Stock Returns ◽

Capital Asset Pricing Model ◽

Capital Asset Pricing ◽

Pricing Model ◽

Capital Asset ◽

Asset Pricing Model

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The Relationship between Systematic Risk and Stock Returns in Tehran Stock Exchange Using the Capital Asset Pricing Model (CAPM)

International Letters of Social and Humanistic Sciences ◽

10.18052/www.scipress.com/ilshs.21.26 ◽

2014 ◽

Vol 21 ◽

pp. 26-35

Author(s):

Mohsen Mehrara ◽

Zabihallah Falahati ◽

Nazi Heydari Zahiri

Keyword(s):

Asset Pricing ◽

Stock Returns ◽

Stock Exchange ◽

Systematic Risk ◽

Capital Asset Pricing Model ◽

Capital Asset Pricing ◽

Pricing Model ◽

Capital Asset ◽

Asset Pricing Model ◽

The Relationship

One of the most important issues in the capital market is awareness of the level Risk of Companies, especially “systemic risk (unavoidable risk)” that could affect stock returns, and can play a significant role in decision-making. The present study examines the relationship between stock returns and systematic risk based on capital asset pricing model (CAPM) in Tehran Stock Exchange. The sample search includes panel data for 50 top companies of Tehran Stock Exchange over a five year period from 1387 to 1392. The results show that the relationship between systematic risk and stock returns are statistically significant. Moreover, the nonlinear (quadratic) function outperforms the linear one explaining the relationship between systematic risk and stock returns. It means that the assumption of linearity between systematic risk and stock returns is rejected in the Tehran Stock Exchange. So we can say that the capital asset pricing model in the sample is rejected and doesn’t exist linear relationship between systematic risk and stock returns in the sample.

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CAPITAL ASSET PRICING MODEL TESTING IN WEST AFRICA ECONOMIC AND MONETARY UNION STOCK MARKET: THE CASE OF IVORIAN LISTED FIRMS

International Journal of Research -GRANTHAALAYAH ◽

10.29121/granthaalayah.v5.i2.2017.1699 ◽

2017 ◽

Vol 5 (2) ◽

pp. 23-30

Author(s):

Zimy Samuel Yannick Gahé ◽

Zhao Hongzhong ◽

Brou Matthias Allate ◽

Thierry Belinga

Keyword(s):

Asset Pricing ◽

Stock Market ◽

Stock Returns ◽

Monetary Union ◽

Economic And Monetary Union ◽

Capital Asset Pricing ◽

Pricing Model ◽

Capital Asset ◽

Listed Firms ◽

Asset Pricing Model

This paper investigates the validity of Capital Asset Pricing Model (CAPM) for the West African Economic and Monetary Union (WAEMU) stock market using monthly stock returns of twenty Côte d’Ivoire’s listed firms from January 2002 to December 2011. We split this interval into different time periods. Each one of them has also been divided into two different sub-periods among which one served as estimation mean and the second one helped to test the estimated parameters obtained using a times series regression. Afterwards some statistical tests have been conducted to see whether the CAPM’s hypotheses hold or not. The findings showed that higher risk is not associated with higher level of return within the study area. Also, there was no relation between stock return and non-systemic risk except for one period where we found evidence that stock returns were affected by other risk than the systematic risk. On the contrary the stock expected rate of return had a linear relationship with the systematic risk. The study suggested that the listed companies consider other factors and variables which could explain their returns.

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