Erasmus university rotterdam
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- Egypt Period
Note: * Significant at a 1% level ** Significant at a 5% level *** Significant at a 10% level Table 8 shows the result for the Three Moment CAPM. Again the results are mixed. For some countries and periods the constant variable is not significantly different from zero, therefore based on the intercept criterion the CAPM hypothesis cannot be rejected. However in other periods the constant variable is significantly different from zero. The beta coefficient is significant on a 1% or 5% level mainly in Egypt and Israel, which means that beta does have an explanatory power on return for these periods. However, in Morocco the beta coefficients are insignificant. The CAPM states that no other measure than beta can explain risk, based on the results for the Three Moment CAPM this hypothesis can be rejected in the case of Israel and Turkey during the crisis, where is significant on a 1% or 10% level. However, for all other countries and period is not significant and does not have explanatory power, which is in favor of the CAPM. In addition, it can be seen from the F-test that the models are not statistically significant in most cases. Once more, the adjusted values show that the goodness of fit of the explanatory variables are very modest. Table 8: Three Moment CAPM
Note: * Significant at a 1% level ** Significant at a 5% level *** Significant at a 10% level Table 9 shows the results of the cross-sectional regression for the Four Moment CAPM. Table 9 shows that for some countries (Israel) and periods (during the crisis, except for Egypt) the constant variable is not significantly different from zero, therefore based on the intercept criterion the CAPM hypothesis cannot be rejected. However in other countries (Egypt) and periods (before the crisis, except for Israel) the constant variable is significantly different from zero. The beta coefficient is significant on a 1% or 5% level only in Egypt, which means that beta does have an explanatory power on return for these periods. Nonetheless, in the other countries the beta coefficients are insignificant, this is evidence against the CAPM. The CAPM states that no other measure than beta can explain risk, based on the results of the Four Moment CAPM this hypothesis can be rejected in the case of Israel for all periods and for Turkey in the total period, where is significant on a 1% , 5% or 10% level. However, is not significant and does not have explanatory power in the other countries and periods, which is in support of the CAPM. As the CAPM expects no other variable to explain risk besides beta, the coefficient is not expected to be significant. This hypothesis of the CAPM cannot be rejected for most countries and periods, which is in support of the CAPM. Interestingly, in two cases the coefficient is significant at a 5% level and has explanatory power, in Egypt before the crisis and in Turkey during the crisis. The F-test shows that the models are not statistically significant in Morocco and Turkey, except Turkey during the crisis. Interestingly, in Morocco none of the explanatory variables are significant. The F-values in Egypt and Israel are mostly significant. Once more, the adjusted values shows that the goodness of fit of the explanatory variable are modest, but the values of Egypt and Israel have increased.. Table 9: Four Moment CAPM
Note: * Significant at a 1% level ** Significant at a 5% level *** Significant at a 10% level Table 10 shows the results of the cross-sectional regression of the Local CAPM. When the result of the Local CAPM are investigated, it shows that the constant variable is only significantly different from zero at a 5% level when the total period of Egypt and Turkey before the crisis are considered. For all other countries and periods, the CAPM intercept criterion cannot be rejected, which is in favor of the CAPM. The beta coefficients are significant in all periods during the crisis, which is in support of the CAPM. However, when the total period and the period before the crisis of Egypt and Israel are considered beta coefficients do not reach significance. In addition these beta values are negative is many cases, which implies a negative risk return relationship. According to the CAPM, higher risk should be associated with higher returns, the results of this study do not support thos hypothesis. The F-tests show that the model is significant when beta is statistically significant. The values shows that the goodness of fit of the explanatory variables are again very modest. The most interesting finding is that the Local CAPM seems to work particularly well during times of crisis, where the values are higher and the CAPM cannot be rejected. The Local CAPM was also investigated without considering the country risk premium, in this case it shows that the constant variable is significantly different from zero in many cases. Based on these results the intercept criterion of the CAPM can be rejected. The overall result of the different versions show mixed evidence. Both in favor as well as against the CAPM. Furthermore, the explanatory power of the models is very modest Table 10: Local CAPM
Note: * Significant at a 1% level ** Significant at a 5% level *** Significant at a 10% level
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