Thomson, systematic risk, as measured by beta, is

Thomson, R. J.

, & Reddy, T. L. (January 01, 2013) added to prior work of authors to reconsider the real terms of capital-asset pricing model (CAPM) in SA.

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As ,with the main question being ” Can the CAPM be accepted in the South African market for the purposes of the stochastic modelling of investment returns in typical actuarial applications?” To test the real terms of the capital asset pricing model, conventional and index-linked bonds had to be included both in the market portfolio composition and in securities market line test. For the investigation, quarterly total returns from the FTSE/JSE all-share index listed on the JSE Securities Exchange from 30 September 1964 to 31 December 2010 were used, together with yields on government bonds and consumer price indices over the same period. As expressed in the securities market line, the CAPM suggests that higher systematic risk, as measured by beta, is associated with higher expected returns, and that the relationship between expected return and beta is linear. In this investigation the above-mentioned predictions of the CAPM were tested for the South African market. Regression tests both of the zero-beta and standard was also applied, as well as a regression analysis. These tests were made for individual versions of the CAPM were created, using both previous betas and in-period betas.


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