The capital-asset pricing model reconsidered: tests in real terms on a South African market portfolio comprising equities and bonds

Thomson, Robert J.; Reddy, T.L.

doi:10.4314/saaj.v13i1.7

Cited by 2 publications

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“…The findings of Van Rensburg and Robertson (), Strugnell et al . (), Ward and Muller () and Thomson and Reddy () all show that the standard version of the CAPM must be rejected for the SA market. Several researchers have considered Fama–French‐styled models for the SA market (see Auret and Cline, for an overview) while others have looked at an APT model that reconstructs SA indices from the underlying equity sectors (Kruger and Van Rensburg, ; Flint et al ., ).…”

Section: Modelling Of the Sa Equity Marketmentioning

confidence: 99%

Global Risk Factors and South African Equity Indices

Polakow

Flint

2014

South African J Economics

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South African equity is frequently portrayed as a market requiring a high degree of local expertise – to appropriately understand its many idiosyncratic features – as well as intimate knowledge of its unique drivers – to prudently invest in the same. This claim is evidenced by the amount of research and effort devoted to understanding South African‐specific economics, interest rates and risks. The aim of this research is to debunk this perception with a simple yet robust and highly replicable statistical model (best‐subsets regression) for the majority of the traded South African equity indices. We show how the South African equity market is mostly a one‐way mirror of a confluence of international factors, all arguable largely unrelated to South Africa. We discuss why these models are currently less useful than their longer‐term predictive averages and note the current relevance of including implied volatility and interest rates as predictors.

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