How Relevant Is the Capital Asset Pricing Model (CAPM) for Tests of Market Efficiency on the Nigerian Stock Exchange?

Obrimah, Oghenovo A.; Alabi, Jacob Abu; Ugo-Harry, Blessing Chika

doi:10.1111/1467-8268.12145

Cited by 20 publications

(10 citation statements)

References 24 publications

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“…The results of hypotheses testing revealed the single-factor capital asset pricing model is invalid in the Jordanian stock market. This conclusion is in line with the results of studies of many researchers who reached the same conclusion about this market (Alqisie & Alqurran, 2016;Alrgaibat, 2015;Blitz et al, 2013) and about many other countries (Dajčman et al, 2013;Dzaja, & Aljinovic, 2013;Li, Gan, Zhuo, & Mizrach, 2014;Nyangara et al, 2016;Obrimah et al, 2015;Saji, 2014;Wu et al, 2017). The hypothesized relationship between the expected rate of return and variables of size, financial leverage, and market rate of return was found to be insignificant ; the expected rate of return for a stock is directly related to the operating leverage of the stock.…”

Section: Discussionsupporting

confidence: 85%

“…The validity of this model was tested by many researchers in many countries (Chaudhary, 2017;El-Mousallamy & El-Masry, 2016;Nyangara, Nyangara, Ndlovu, & Tyavambiza, 2016;Obrimah, Alabi, & Ugo-Harry, 2015;Saji, 2014;Sattar, 2017;Wu et al, 2017). Some researchers supported the validity of the model (Bajpai & Sharma, 2015;Bjuggren & Eklund, 2015;Lee, Cheng, & Chong, 2016;Novak, 2015) while others concluded that the model is invalid in estimating the expected rate of return on the financial asset (Alqisie & Alqurran, 2016;Alrgaibat, 2015;Chaudhary, 2017;Wu et al, 2017).…”

Section: Capital Asset Pricing Modelmentioning

confidence: 99%

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Testing a Multi-factor Capital Asset Pricing Model in the Jordanian Stock Market

Elshqirat¹,

Sharifzadeh²

2018

IBR

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A valid and accurate capital asset pricing model (CAPM) may help investors and mutual funds managers in determining expected returns which may lead to increase their profits and community resources. The problem is that the traditional CAPM does not accurately predict the expected rate of return. A more accurate model is needed to help investors in determining the intrinsic price of the financial asset they want to sell or buy. The purpose of this study was to examine the validity of the single-factor CAPM and then develop and test a multifactor CAPM in the Jordanian stock market. The study was informed by the modern portfolio theory and specifically by the single-factor CAPM developed by Sharpe, Lintner, and Mossin. The research questions for the study examined the factors that may explain the variation in the expected rate of return on stocks in the Jordanian stock market and the relationship between the expected rate of return and factors of market return, company size, financial leverage, and operating leverage. A causal-comparative quantitative research design was employed to achieve the purpose of the study by testing the listed companies on the Amman stock exchange (ASE) for the period from 2000 to 2015. Data were collected from the ASE database and analyzed using the multiple regression model and t test. The results revealed that market return, company size, and financial leverage are not predictors of the expected rate of return while operating leverage is a predictor.

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Section: Discussionsupporting

confidence: 85%

Section: Capital Asset Pricing Modelmentioning

confidence: 99%

Testing a Multi-factor Capital Asset Pricing Model in the Jordanian Stock Market

Elshqirat¹,

Sharifzadeh²

2018

IBR

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“…At the individual level, Bodie et al (2014) denote that the following areas are essential for measuring a firm's performance: (1) Level of leverage, (2) Efficiency in the use of assets, (3) Liquidity management, and (4) Return on investment. On the other hand, at the collective level, Obrimah et al (2015) propose that the market is influenced by microeconomic variables that specifically affect the productive sector in question, as well as macroeconomic variables that alter asset prices throughout the economy. These can be political-legal, technological, social, environmental, or economic per se.…”

Section: Return Of Sharesmentioning

confidence: 99%

Risk of Insolvency and Return of Shares: Empirical Analysis of Altman's Z-Score in the Peruvian Mining Sector Between 2008-2018

2021

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This research pretends to evaluate the significance of the insolvency risk, referred by Altman's Z-Score, in the explanation of the historical return of the 7 most liquid mining companies listed in the Lima Stock Exchange based on a Market Return Model (MRM) under a cross-sectional approach. In this sense, daily data was collected from the S&P/BVL Peru Select index and the Peruvian 10-year Sovereign Bond between 2008-2018, approximated quarterly by the geometric average to homogenize them with the frequency of the Z. Thus, two central results were obtained: 1) The Z-Score, as an estimator of insolvency risk, is not valid to explain the behavior of the historical return of the shares, and 2) The Market Premium is statistically significant within the yield analysis. Also, contrary to the common literature, the results suggest the validity of Sharpe's conventional CAPM.

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“…As reported by Kumar and Goyal (2015), the majority of studies concerning the behavioral biases among investors were conducted in the United States and other developed countries with a few studies conducted in the developing countries. Behavioral finance is important in emerging markets because the traditional asset pricing models are invalid in some of these markets including the capital asset pricing model (Alqisie & Alqurran, 2016;Chaudhary, 2017;Elshqirat & Sharifazdeh, 2018;Obrimah, Alabi & Ugo-Harry, 2015;Soumaré , Amé nounvé , Diop, Mé ité & N'sougan, 2013) and the arbitrage pricing theory (Elshqirat, 2019;Gul & Khan, 2013;Okoro, 2017). Concerning herding behavior, however, the same conclusion about the lack of studies in emerging markets can be noted (Kumar & Goyal, 2015).…”

Section: Herding Behaviormentioning

confidence: 99%

Testing Sectoral Herding in the Jordanian Stock Market

Elshqirat¹

2019

IBR

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The main purposes of this quantitative study were to examine the existence of herding behavior among investors in Amman stock exchange (ASE) at market and sector level in addition to testing the behavior during the market rising and falling and examining whether the behavior existence is different before and after the global financial crisis of 2008. The theoretical base of the study was the behavioral finance which assumes that investors are not completely rational and they may follow others when taking investment decisions. The main enquires of the study were about the existence of herding in the Jordanian market, whether it's affected by conditions of market rising and falling, and whether it's affected by the financial crisis. A quantitative design was employed to achieve the purposes of this study which covers the period 2000 - 2018. Data were obtained from ASE website and analyzed using ordinary least squares method. The results indicated that herding is absent in the Jordanian market if tested at market level while it exists in services and industrial sectors if tested at sectors level. The financial crisis did not affect the presence of herding at market level while it did affect the behavior in services and industrial sectors. Moreover, the results revealed that market condition of rising and falling affected herding at market level but not at sectors level. It is also concluded that the global financial crisis changed the presence of herding behavior during conditions of rising and falling in market and in each sector.

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How Relevant Is the Capital Asset Pricing Model (CAPM) for Tests of Market Efficiency on the Nigerian Stock Exchange?

Cited by 20 publications

References 24 publications

Testing a Multi-factor Capital Asset Pricing Model in the Jordanian Stock Market

Testing a Multi-factor Capital Asset Pricing Model in the Jordanian Stock Market

Risk of Insolvency and Return of Shares: Empirical Analysis of Altman's Z-Score in the Peruvian Mining Sector Between 2008-2018

Testing Sectoral Herding in the Jordanian Stock Market

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