Erasmus university rotterdam

EMPIRICAL RESULTS AND INTERPRETATION OF THE FINDINGS

The main question in this article is whether the CAPM is applicable in emerging markets and if so, which model performs best in terms of the amount of variance explained by the model. In order to test the CAPM, the returns of individual companies of four emerging markets were investigated, namely Egypt, Israel, Morocco and Turkey. Besides the traditional CAPM (Global CAPM), three other versions of the model were investigated; the Three Moment CAPM, the Four Moment CAPM and the Local CAPM. In addition, the models were tested in three different time periods (total period, before the financial crisis, during the financial crisis). This chapter is organized as follows. First, the properties of the data of the four emerging markets and the world market will be described. Hereafter, the results of the regressions of the versions of the CAPM will be described.