Asset Price Developments in an Emerging Stock Market: The Case of Mauritius
AbstractThe Stock Exchange of Mauritius (SEM) has been in operation for more than 15 years. As at December 2004, there were 40 companies listed on the official market. The main objectives of this study were to analyse the risk return characteristics of all the companies listed on the SEM in terms of both total risk and systematic risk; to estimate time-varying betas; to investigate the existence of the size and book-to-market equity effects on the SEM and finally to augment the Fama and French (1993) three-factor model, by taking into account the time variation in betas. The period of study was January 1997 to June 2003 and using monthly returns. The study found out that CAPM stationary betas are different from betas corrected for thin trading. It is therefore crucial to take thin trading into account when estimating systematic risk for markets characterized by thin trading. Time-varying betas are different from stationary betas and the result supports the hypothesis that the SEM behaves like a small market capitalization index. The Fama and French three-factor model holds for the SEM. In other words, both a size effect and a book-to-market equity effect are present on the SEM. The augmented Fama and French model shows that the time variation in betas is priced, but the size and book-to-market equity effects are still statistically significant. The FF model is therefore robust after taking into account the time-variation in beta. However, the results might be sample specific. The test must be extended across other stock exchanges.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by African Economic Research Consortium in its series Research Papers with number RP_219.
Length: 60 pages
Date of creation: Jan 2011
Date of revision:
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (winston wachanga).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.