Testing Multi-Factor Asset Pricing Models in the Visegrad Countries
There is no consensus in the literature as to which model should be used to estimate stock returns and the cost of capital in the emerging markets. The Capital Asset Pricing Model (CAPM), which is most often used for this purpose in the developed markets, has a poor empirical record and is likely not to hold in the less developed and less liquid emerging markets. Various factor models have been proposed to overcome the shortcomings of the CAPM. This paper examines both the CAPM and macroeconomic factor models in terms of their ability to explain average stock returns using data from the Visegrad countries. We find, as expected, that the CAPM is not able to do this task. However, factor models, including factors such as the excess market return, industrial production, inflation, money, the exchange rate, exports, the commodity index, and the term structure, can in fact explain part of the variance in the Visegrad countries’ stock returns.
Year of publication: |
2011
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Authors: | Borys, Magdalena Morgese Borys |
Published in: |
Czech Journal of Economics and Finance (Finance a uver). - Institut ekonomických studií, ISSN 0015-1920. - Vol. 61.2011, 2, p. 118-139
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Publisher: |
Institut ekonomických studií |
Subject: | CAPM | macroeconomic factor models | asset pricing | cost of capital | Poland |
Saved in:
freely available
Extent: | application/pdf |
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Type of publication: | Article |
Language: | English |
Classification: | G10 - General Financial Markets. General ; G11 - Portfolio Choice ; G12 - Asset Pricing ; G15 - International Financial Markets ; G31 - Capital Budgeting; Investment Policy |
Source: |
Persistent link: https://www.econbiz.de/10009147423
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