Is CAPM a Good Predictor Of Stock Return In The Nigerian Conglomerates Stocks?

NWUDE, E.C and Agbo, Elias Igwebuike (2013) Is CAPM a Good Predictor Of Stock Return In The Nigerian Conglomerates Stocks? European Journal of Business and Management, 5 (28). pp. 134-144. ISSN 2222-2839

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Abstract

This research is on testing the predictive power of Capital Asset Pricing Model (CAPM) as enunciated by Sharpe (1964) in the determination of the required rates of return of Nigerian Conglomerates sector stocks that coincides with the actual rates of return. As it were, there is no clear cut understanding on the belief with particular reference to Nigerian Conglomerates sector stocks. In the light of the above assertion, the objective of this study is to find out the required rate of return of Nigerian Conglomerates sector stocks from 2000-2012 and compare them with the actual rates of return in the corresponding periods to identify the valuation status of the stocks. Being an empirical study, analytical research design was adopted. The data used were secondary data, which were collected from the financial statements of the firms, The Nigerian Stock Exchange publications, and Central banks of Nigeria publications. The findings show that the Capital Asset Pricing Model (CAPM) as enunciated by Sharpe (1964) did not give any appropriate forecast of the returns from the Conglomerates sector stocks throughout the thirteen-year period of study. The CAPM made fifty-six under-valuations and sixty-one overvaluations to make a total of one hundred and seventeen misappropriations in the thirteen years period of study. Therefore, the Capital Asset Pricing Model (CAPM) is not a good predictor of stock return in the Conglomerates sector of the Nigerian Stock Exchange.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Faculty of Management and Social Sciences
Depositing User: mrs chioma hannah
Date Deposited: 26 Apr 2019 13:26
Last Modified: 26 Apr 2019 13:26
URI: http://eprints.gouni.edu.ng/id/eprint/1343

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