Analysing security performance in Morocco and South Africa using CAPM

Coffie, William

doi:10.1504/aajfa.2014.063763

Cited by 2 publications

(2 citation statements)

References 39 publications

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“…However, both the Sharpe-Lintner-Mossin single factor and Fama-French multifactor models have received mixed results in the empirical literature around the world. Turning to Africa, although a number of studies have investigated the performance of the single factor model in South Africa (Coffie, 2014;Reddy & Thomson, 2012& 2013Nel 2011) none have investigated the performance of the Incorporating size and value (BE/ME) factors in the model does not impact significantly on the estimation of cost of equity, and, therefore, has no implications for project evaluation, choice of financing and composition of capital. Furthermore, the evidence presented in Table 2 suggests that the risk return structure of securities will not change by including size and value premia.…”

Section: Discussionmentioning

confidence: 99%

Multifactor explanation of security returns in South Africa

Chukwulobelu

Fosu

Coffie

2014

IJMP

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This paper evaluates the performance of Fama and French three factor model in South Africa for individual securities. We employed a multivariate time series methodology similar to Fama and French (1993). The empirical results contradict the theoretical proposition of the Fama-French model and inconsistent with results documented by most studies in the developed and some emerging markets. The size and value premia are very weak when included in the regression model. Furthermore, the Fama and French three factor model is unable to explain the return generating process of securities trading on Johannesburg Stock Exchange. This has important implication for corporate managers, investors as well as fund and portfolio managers in terms estimating cost of equity, rate of return and portfolio allocation. Bibliographical notes:Osita has a cumulative work experience of more than 33 years, which straddles three very important sectors in the public and private sectors -the academia, management consultancy, government/politics and international oil marketing. Currently, he is a Professor of Finance and a Minister of state for Economic Planning & Budget in Nigeria.He has supervised PhDs to completion and currently have five ongoing PhD students in quantitative finance and capital market theory.

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Section: Discussionmentioning

confidence: 99%

Multifactor explanation of security returns in South Africa

Chukwulobelu

Fosu

Coffie

2014

IJMP

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“…Since its release in 1964, the Capital Asset Pricing Model (CAPM) has been and is still extensively used, studied and criticized within the framework of studying cross-sections of average stock returns. The model, that stems from Markowitz's Modern Portfolio Theory (Sharpe, 1964), essentially suggests that the expected return of an individual asset or portfolio is directly related to what is known as "non-diversifiable" or "systematic" risk, that is a risk that cannot be reduced or eliminated through diversification (Coffie, 2014). However, substantial evidence was found against the validity of the latter.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

A Comparative Study of the Fama-French Three Factor and the Carhart Four Factor Models: Empirical Evidence from Morocco

Tazi

Aguenaou

Abrache

2022

IJEFI

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This paper investigates the validity of the Fama-French Three Factor (FF3F) and the Carhart Four Factor (C4F) models in Morocco. Monthly returns of Casablanca Stock Exchange-listed companies are extracted from Reuters DATASTREAM over a 5 years’ period (2013-2017). Market, size, value and momentum effect-mimicking exogenous variables are formed and regressed against the returns of size and value-sorted portfolios over a total of 8 multivariate linear regressions. While the size and value effects were found to partially hold, the momentum effect was found to be insignificant. Additionally, the C4F Model did not exhibit a better explanatory power compared to the FF3F Model. It appears that both models cannot be fully relied on in order to predict cross-sections of return in the Casablanca Stock Exchange (CSE), as they both only partially hold in the latter. Ultimately, this study brings value to the existing literature by testing two widely explored asset pricing models in an emerging market where equity research-oriented inquiries are relatively scarce or basic. Even if the models do not fully hold in the Moroccan context, this study posits whether the individual anomalistic factors hold in the CSE, which might be useful for future asset pricing models augmenting endeavors.

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Analysing security performance in Morocco and South Africa using CAPM

Cited by 2 publications

References 39 publications

Multifactor explanation of security returns in South Africa

Multifactor explanation of security returns in South Africa

A Comparative Study of the Fama-French Three Factor and the Carhart Four Factor Models: Empirical Evidence from Morocco

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