Analysing security performance in Morocco and South Africa using CAPM
by William Coffie
Afro-Asian J. of Finance and Accounting (AAJFA), Vol. 4, No. 2, 2014

Abstract: This paper examines how well the capital asset pricing model (CAPM) is able to describe the performance of individual securities listed on Casablanca and Johannesburg Stock Exchanges, Morocco and South Africa respectively. Jensen (1968) methodology is employed in the study. While there is a reasonable amount of empirical studies on the performance of the CAPM in Africa, the validity of the model has not previously been addressed in this manner in Morocco and South Africa. The CAPM posits that the performance of assets is solely explained by the market beta. The results of this study do not support this assertion. Although it was found that beta contributes to the variation of security returns in Morocco and South Africa, that contribution is insufficient to fully explain security performance. Instead, we found positive and significant alpha values, representing factors unexplained by market beta, and hence deviations from the CAPM.

Online publication date: Thu, 31-Jul-2014

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