Is CAPM Dead or Alive in the Brazilian Equity Market?
Joe Akira Yoshino
Universidade de São Paulo - Department of Economics
Edson Bastos e Santos
Central Bank of Brazil
September 11, 2009
Review of Applied Economics, Vol. 5, Nos. 1 & 2, p. 127, 2009
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: G12Accepted Paper Series
Date posted: September 11, 2010
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