Size and liquidity effects in African frontier equity markets
Size and liquidity effects in African frontier equity markets
This study contrasts the effectiveness of the Capital Asset Pricing Model (CAPM) against more recent augmented variants including size and book-to-market factors (Fama and French, 1993), liquidity (Liu, 2006) as well as both size and liquidity factors of Martinez et al. (2005) in explaining average returns in industry portfolios across Sub Saharan Africa (SSA) excluding South Africa. This draws on a unique sample set of stocks from main board of Mauritius, local Namibian market, Botswana, Kenya, Nigeria, Ghana and Cote d'Ivoire's BRVM. The evidence suggests that both size and liquidity factors are important in explaining average returns which is supported by extending the analysis using time varying coefficient Kalman filter techniques that reveal liquidity effects in all SSA markets while substantial size effects are present in Namibia and Zambia.
CAPM, emerging financial markets, Kalman filter, liquidity, sub Saharan Africa
681-707
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
May 2012
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Abstract
This study contrasts the effectiveness of the Capital Asset Pricing Model (CAPM) against more recent augmented variants including size and book-to-market factors (Fama and French, 1993), liquidity (Liu, 2006) as well as both size and liquidity factors of Martinez et al. (2005) in explaining average returns in industry portfolios across Sub Saharan Africa (SSA) excluding South Africa. This draws on a unique sample set of stocks from main board of Mauritius, local Namibian market, Botswana, Kenya, Nigeria, Ghana and Cote d'Ivoire's BRVM. The evidence suggests that both size and liquidity factors are important in explaining average returns which is supported by extending the analysis using time varying coefficient Kalman filter techniques that reveal liquidity effects in all SSA markets while substantial size effects are present in Namibia and Zambia.
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e-pub ahead of print date: 1 March 2012
Published date: May 2012
Keywords:
CAPM, emerging financial markets, Kalman filter, liquidity, sub Saharan Africa
Identifiers
Local EPrints ID: 423327
URI: http://eprints.soton.ac.uk/id/eprint/423327
ISSN: 0960-3107
PURE UUID: 49d83268-7b25-4666-b630-70fcc73ca95c
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Date deposited: 20 Sep 2018 16:30
Last modified: 16 Mar 2024 04:37
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