What is it about?
This paper examines whether there exist formulations of the Capital Asset Pricing Model (CAPM) that are efficient at describing differences in stock returns within the Nigerian Stock Exchange (NSE).
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Why is it important?
If an asset pricing model such as the CAPM is not efficient at describing differences in stock returns, it cannot be utilized for ascertaining the extent to which a stock market is functioning efficiently. An understanding of the extent to which stock markets are efficient is a critical component of assessments of the extent to which capital markets are efficient.
Perspectives
Empirical results show that while relative illiquidity increases the risk of the Nigerian Stock Market, it simultaneous eliminates the need to hold a riskless asset to achieve diversification benefits. Empirical results validate the presence of trade-offs between risk aversion and skewness preference.
Dr Oghenovo A Obrimah
Fisk University
Read the Original
This page is a summary of: How Relevant Is the Capital Asset Pricing Model (CAPM) for Tests of Market Efficiency on the Nigerian Stock Exchange?, African Development Review, September 2015, Wiley,
DOI: 10.1111/1467-8268.12145.
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