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Size and liquidity effects in African frontier equity markets

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  • Bruce Hearn
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    Abstract

    This study contrasts the effectiveness of the Capital Asset Pricing Model (CAPM) against more recent augmented variants including size and book-to-market factors (Fama and French, 1993), liquidity (Liu, 2006) as well as both size and liquidity factors of Martinez et al . (2005) in explaining average returns in industry portfolios across Sub Saharan Africa (SSA) excluding South Africa. This draws on a unique sample set of stocks from main board of Mauritius, local Namibian market, Botswana, Kenya, Nigeria, Ghana and Cote d’Ivoire's BRVM. The evidence suggests that both size and liquidity factors are important in explaining average returns which is supported by extending the analysis using time varying coefficient Kalman filter techniques that reveal liquidity effects in all SSA markets while substantial size effects are present in Namibia and Zambia.

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    File URL: http://hdl.handle.net/10.1080/09603107.2011.621881
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 22 (2012)
    Issue (Month): 9 (May)
    Pages: 681-707

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    Handle: RePEc:taf:apfiec:v:22:y:2012:i:9:p:681-707

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    Cited by:
    1. Hearn, Bruce, 2013. "Size and liquidity effects in Nigeria: an industrial sector study," MPRA Paper 47975, University Library of Munich, Germany.
    2. Kuttu, Saint, 2014. "Return and volatility dynamics among four African equity markets: A multivariate VAR-EGARCH analysis," Global Finance Journal, Elsevier, vol. 25(1), pages 56-69.
    3. Hearn, Bruce & Piesse, Jenifer, 2013. "Firm level governance and institutional determinants of liquidity: Evidence from Sub Saharan Africa," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 93-111.
    4. Hearn, Bruce, 2014. "The liquidity cost implications arising from the attraction of regional primary listings: Evidence from West Africa," Research in International Business and Finance, Elsevier, Elsevier, vol. 30(C), pages 91-110.

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