Title: An analysis of CAPM efficiency: the case of the DFM market in Dubai

Authors: Angelo Corelli; Siham Achcar; Anna Chekanova; Rim Ghalayini; Nazli Orazalyyeva

Addresses: Maastricht School of Management, Endepolsdomein 150, 6229EP Maastricht, Netherlands ' American University in Dubai, Media City, Dubai, United Arab Emirates ' American University in Dubai, Media City, Dubai, United Arab Emirates ' American University in Dubai, Media City, Dubai, United Arab Emirates ' American University in Dubai, Media City, Dubai, United Arab Emirates

Abstract: The project analyses the DFM market in terms of efficiency, by applying portfolio theory to the construction of the efficient frontier and the security market line (SML). Moreover, a SML analysis is performed in order to obtain 'buy' or 'sell' recommendations. The dataset includes 35 companies that are currently listed and showing reliable data evolution over time. The constrained minimisation, not allowing for short selling so to mimic the regulatory environment on DFM, shows that all stocks are below the capital market line. Unconstrained optimisation is not possible due to the variance-covariance matrix not being positive-definite. The SML analysis shows that signals are contradictory and equally split between 'buy' and 'sell', resulting in uncertainty about the future trend of the market.

Keywords: efficiency; portfolio; optimisation; frontier; capital market line; CML; security market line; SML.

DOI: 10.1504/IJBCRM.2021.119944

International Journal of Business Continuity and Risk Management, 2021 Vol.11 No.4, pp.367 - 378

Accepted: 23 Mar 2020
Published online: 04 Jan 2022 *

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