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Applying the CAPM and the Fama--French models to the BRVM stock market

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  • Issouf Soumar�
  • Edoh Kossi Am�nounv�
  • Ousmane Diop
  • Dramane M�it�
  • Yao Djifa N'sougan

Abstract

This article applies and compares two asset-pricing models -- the Capital Asset Pricing Model (CAPM) and the Fama--French three-factor pricing model -- on the stocks of 28 companies listed on the Bourse R�gionale des Valeurs Mobilières (BRVM) for the period July 2001--December 2008. We find that 11 stocks satisfy the CAPM, and the market risk factor explains an average of only 11.32% of the excess stock return variations. When we apply the Fama--French model, we find that 10 of the 28 stocks satisfy the model's hypotheses and equations: for most of these securities, a CAPM-type model specification is rejected. When we add the size and book-to-market explanatory factors, the average adjusted R -super-2 increases to 20.40%. Both models, however, failed to explain the variations in returns of at least 60% of the stocks listed on this market.

Suggested Citation

  • Issouf Soumar� & Edoh Kossi Am�nounv� & Ousmane Diop & Dramane M�it� & Yao Djifa N'sougan, 2013. "Applying the CAPM and the Fama--French models to the BRVM stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 23(4), pages 275-285, February.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:4:p:275-285
    DOI: 10.1080/09603107.2012.718062
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    References listed on IDEAS

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    1. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
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    Cited by:

    1. Boamah, Nicholas Addai & Watts, Edward & Loudon, Geoffrey, 2017. "Regionally integrated asset pricing on the African stock markets: Evidence from the Fama French and Carhart models," Journal of Economics and Business, Elsevier, vol. 92(C), pages 29-44.
    2. Linh Nghiem, 2015. "Risk-return relationship: An empirical study of different statistical methods for estimating the Capital Asset Pricing Models (CAPM) and the Fama-French model for large cap stocks," Papers 1511.07101, arXiv.org.
    3. Cueto, José Manuel, 2019. "Models for expected returns with statistical factors," DES - Working Papers. Statistics and Econometrics. WS 28776, Universidad Carlos III de Madrid. Departamento de Estadística.

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