Beta, firm size, book-to-market equity and stock returns: Evidence from the Nairobi Stock Exchange
Abstract
This paper sought to compare the explanatory power of a single index model with
the multifactor asset pricing model of Fama and French (FF) (1996) for
companies listed in the main investment market segment at the Nairobi Stock
Exchange over the years 1999 to 2005. According to the CAPM, the market beta
alone is sufficient to explain security returns and that there is a positive expected
premium for investing in beta risks. The current consensus is that firm size and
book-to-market equity factors are pervasive risk factors besides the overall
market factor.
The results of the study suggest that the CAPM beta alone is not sufficient to
describe the cross section of expected returns. The study finds that the size and
book-to-market equity help explain the variations in average stock returns in a
reasonable manner.
Citation
Masters thesis University of Nairobi (2006)Publisher
University of Nairobi. School of Business Studies
Description
Degree of Master of Business Administration