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

Listed author(s):
  • Issouf Soumaré
  • Edoh Kossi Aménounvé
  • Ousmane Diop
  • Dramane Méité
  • Yao Djifa N'sougan
Registered author(s):

    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 Régionale 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.

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

    Volume (Year): 23 (2013)
    Issue (Month): 4 (February)
    Pages: 275-285

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    Handle: RePEc:taf:apfiec:v:23:y:2013:i:4:p:275-285
    DOI: 10.1080/09603107.2012.718062
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