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Empirical test of capital asset pricing model on securities return of listed firms in Nigeria

Author

Listed:
  • Henry Usunobun Ogiugo

    (Ajayi Crowther University, Nigeria)

  • Isaac Olufemi Adesuyi

    (Elizade University, Nigeria)

  • Sunday Oseiweh Ogbeide

    (Elizade University, Nigeria)

Abstract

This paper applied the capital-asset pricing model (CAPM) to determine stock returns of listed firms in the Nigeria Stock Exchange (NSE). For the purpose of investigation, annual data on stock price of twenty six (26) listed firms, Treasury bill a measure of risk- free rate and all share indexes a proxy for market returns were extracted while beta value was computed for the period 2010 to 2016 upon which the model was analyzed. Finding indicates that the CAPM generated a very high return among the firms given the influence of the beta coefficient. The study concludes that higher market risk measured by beta, is associated with higher expected returns. It is therefore recommended that managers of firms in other sectors in Nigeria need to constantly use this model to price security return with a view to guiding investors at investing in securities based on risk preference behavior and also to enable them maximize wealth from a basket of portfolio.

Suggested Citation

  • Henry Usunobun Ogiugo & Isaac Olufemi Adesuyi & Sunday Oseiweh Ogbeide, 2020. "Empirical test of capital asset pricing model on securities return of listed firms in Nigeria," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 2(4), pages 825-836, December.
    • Handle: RePEc:ssi:jouird:v:2:y:2020:i:4:p:825-836
    DOI: 10.9770/ird.2020.2.4(8)
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    References listed on IDEAS

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    1. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    Cited by:

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    More about this item

    Keywords

    market returns; treasury bill; beta; covariance; security return; stock returns;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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