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Is CAPM Dead or Alive in the Brazilian Equity Market?Joe Akira YoshinoUniversidade de São Paulo - Department of Economics Edson Bastos e SantosCentral Bank of Brazil September 11, 2009 Review of Applied Economics, Vol. 5, Nos. 1 & 2, p. 127, 2009 Abstract: The central purpose of this work is to test the Sharpe-Lintner-Black Capital Asset Pricing Model in the Brazilian equity market. We have concluded that the CAPM is dead in the Brazilian equity market because, besides using the market premiums to explain the panel equity premiums, there are also some anomalies, such as, the firm size, the equity price-to-book value, the dividend yield, and the price-earnings ratio. Furthermore, by using the panel cointegration FMOLS (fully modified OLS) estimator, this paper corroborates the Fama & French three-factor model (1992, 1993). This work finds also two new three-factor models to explain the local market that satisfy the non-arbitrage condition. These results are important for the purpose of asset pricing and hedging in the Brazilian equity market.
Number of Pages in PDF File: 16 Keywords: Asset Pricing, Panel CAPM, Fama and French’s Three-Factor Model, Style Indexes JEL Classification: G12 Accepted Paper SeriesDate posted: September 11, 2010Suggested CitationContact Information
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