Capital Asset Pricing Model (CAPM) and the Douala Stock Exchange

Amenawo Ikpa Offiong, Hodo Riman, Helen Walter Mboto, Eyo Itam Eyo and Diana Gembom Punah

International Journal of Financial Research, 2020, vol. 11, issue 5, 191-198

Abstract: This study examines if the Capital Asset Pricing Model (CAPM) can be applied to the Douala Stock Exchange. The study utilized monthly stock returns from the three companies listed on the Douala Stock Exchange (DSX), for the period 30th April 2009 to 31st August 2017. Ordinary Least Square regression analysis was adopted for the study to examine if individual stocks can predict a better stock beta. The Black, Jensen, and Scholes (1972) CAPM version were also examined in this study to assess the validity of the zero beta estimate. The result of the individual estimates could not establish the validity of the CAPM theory. Further analysis showed that the Beta for the three assets combined portfolio was not statistically significant. However, when two securities were combined into a single asset portfolio, the portfolio b¨ºta was statistically significant. The significant result of the two asset portfolio confirms that Beta was a linear function of security returns in the DSX market. The study concludes that there will be a need for the government of Cameroun to liberalize the DSX market and allow more firms to be quoted on the floor of the exchange. This decision will allow for the deepening of the DSX market, enhance the liquidity level of the market, and enable investors to reap adequate returns from their investment through holding a portfolio of assets.

Keywords: Cameroun; stock market; capital asset pricing model; beta; risk premium (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:11:y:2020:i:5:p:191-198

DOI: 10.5430/ijfr.v11n5p191

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