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

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

Applied Financial Economics, 2013, vol. 23, issue 4, 275-285

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.

Date: 2013
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DOI: 10.1080/09603107.2012.718062

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