Contribution to the Valuation of BRVM’s Assets: A Conditional CAPM Approach
National School of Statistics and Economic Analysis of Dakar, CP 45512 Dakar, Senegal
Department of Economics, University Gaston Berger of Saint-Louis, Saint-Louis 00234, Senegal
Department of Statistics, University of Montreal, Montreal, QC H3T 1J4, Canada
Author to whom correspondence should be addressed.
These authors contributed equally to this work.
Received: 29 July 2018 / Revised: 27 November 2018 / Accepted: 5 December 2018 / Published: 6 February 2019
The conditional capital asset pricing model (CAPM) theory postulates that the systematic risk (
) of an asset or portfolio varies over time. Several dynamics are thus given to systematic risk in the literature. This article looks for the dynamic that seems to best explain the returns of the assets of the Regional Stock Exchange of West Africa (BRVM) by comparing two dynamics: one by the Kalman filter (assuming that the
follow a random walk) and the other by the Markov switching (MS) model (assuming that
varies according to regimes) for four portfolios of the BRVM. Having found a link between the beta of the market portfolio and the size criterion (measured by capitalization), the two previous models were re-estimated with the addition of the SMB (Small Minus Big) variable. The results show according to the RMSE criterion that the estimation by the Kalman filter fits better than MS, which suggests that investors cannot anticipate systematic risk because of its high volatility.
This is an open access article distributed under the Creative Commons Attribution License
which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
Share & Cite This Article
MDPI and ACS Style
Cisse, M.; Konte, M.; Toure, M.; Assani, S.A. Contribution to the Valuation of BRVM’s Assets: A Conditional CAPM Approach. J. Risk Financial Manag. 2019, 12, 27.
Cisse M, Konte M, Toure M, Assani SA. Contribution to the Valuation of BRVM’s Assets: A Conditional CAPM Approach. Journal of Risk and Financial Management. 2019; 12(1):27.
Cisse, Mamadou; Konte, Mamadou; Toure, Mohamed; Assani, Smael A. 2019. "Contribution to the Valuation of BRVM’s Assets: A Conditional CAPM Approach." J. Risk Financial Manag. 12, no. 1: 27.
Show more citation formats
Show less citations formats
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.
[Return to top]
Multiple requests from the same IP address are counted as one view.