Next Article in Journal
Multivariate Student versus Multivariate Gaussian Regression Models with Application to Finance
Previous Article in Journal
Geometric No-Arbitrage Analysis in the Dynamic Financial Market with Transaction Costs
Previous Article in Special Issue
Forecasting Volatility: Evidence from the Saudi Stock Market
Article Menu

Export Article

Open AccessArticle
J. Risk Financial Manag. 2019, 12(1), 27; https://doi.org/10.3390/jrfm12010027

Contribution to the Valuation of BRVM’s Assets: A Conditional CAPM Approach

1
National School of Statistics and Economic Analysis of Dakar, CP 45512 Dakar, Senegal
2
Department of Economics, University Gaston Berger of Saint-Louis, Saint-Louis 00234, Senegal
3
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
(This article belongs to the Special Issue Stock Market Volatility Modelling and Forecasting)
Full-Text   |   PDF [425 KB, uploaded 19 February 2019]   |  

Abstract

The conditional capital asset pricing model (CAPM) theory postulates that the systematic risk ( β ) 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 β follow a random walk) and the other by the Markov switching (MS) model (assuming that β 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. View Full-Text
Keywords: West African Regional Market (BRVM); conditional capital asset pricing model (CAPM); Kalman filter; Markov switching (MS) model West African Regional Market (BRVM); conditional capital asset pricing model (CAPM); Kalman filter; Markov switching (MS) model
Figures

Graphical abstract

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).
SciFeed

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.

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.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
J. Risk Financial Manag. EISSN 1911-8074 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top