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Testing the CAPM-GARCH Models in the GCC-Wide Equity Sectors

Author

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  • Ali BENDOB
  • Mohamed CHIKHI
  • Fatma BENNACEUR

Abstract

This paper tests the conditional and non-conditional versions of the Capital Asset Pricing Model (CAPM) in Gulf Cooperation Council GCC capital markets -wide equity sectors upon daily data during the period from February 22ed 2007 to February 22ed 2012. In the empirical analysis, we used Generalized Autoregressive Conditional heteroscedasticity (GARCH) models with CAPM. Main findings seem to show that the CAPM-EGARCH (1.1) appears more advantages than the traditional CAPM at the sectors considered in this study. This approach can be improved and developed in order to be widely applied as this model takes into account shocks, especially in the crisis period where volatilities are very high.

Suggested Citation

  • Ali BENDOB & Mohamed CHIKHI & Fatma BENNACEUR, 2017. "Testing the CAPM-GARCH Models in the GCC-Wide Equity Sectors," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 5(4), pages 413-430.
    • Handle: RePEc:asi:ajemod:v:5:y:2017:i:4:p:413-430:id:916
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    Citations

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    Cited by:

    1. Roman Mestre, 2021. "A wavelet approach of investing behaviors and their effects on risk exposures," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-37, December.
    2. Michel Terraza & Roman Mestre, 2021. "Adjusted beta based on an empirical comparison of OLS ‐CAPM and the CAPM with EGARCH errors," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3588-3598, July.
    3. Roman Mestre, 2019. "Time-Frequency Multi-Betas Model-An Application with Gold and Oil -," Cahiers de recherche 19-05, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.

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