The aim of this master thesis was to examine whether the noticed effect of Black Monday October 1987 on stock market volatility has also influenced the predictive power of the single factor CAPM and the Fama French three factor CAPM, in order to conclude whether the models are less effective after the stock market crash. I have used an OLS regression analysis and a Monte Carlo Simulation technique. I have applied these techniques on 12 industry portfolios with US data to draw a conclusion whether the predictability of the single and three factor model has changed after October 1987. My research confirms that the single factor CAPM performs better before October 1987 and also found evidences that support the same hypothesis of Black Monday effect on the predictive power of the Fama French three factor model.

I denna uppsats undersöker jag huruvida CAPM eller APT modellerna ger resultat på den svenska aktiemarknaden mellan 1998 och 2007. Jag undersöker om någon av dessa modeller passar in i den svenska aktiemarknaden och hurdan är resultatet. Det som gör uppsatsen intressant är att jag använder båda modellerna i en och samma studie och jämför resultatet av uppskattningar av modellerna. Som markandsindex har jag använt OMXS30 index och som makroekonomiska variabler i APT-modellen har jag använt inflation, oljepris, industriproduktionsindex och ränta. Resultatet av studien är att med de makroekonomiska variablerna, som jag har använt, ger både CAPM och APT likvärdiga resultat. Slutsatsen av min studie är att APT med de rätta variablerna är en bättre modell att skatta priset på aktier än CAPM. / In this essay, I examine whether CAPM or APT models give results on the Swedish stock market between 1998 and 2007. I examine if either CAMP or APT or both of these models fits in on the Swedish stock market and what the result is. What makes this essay interesting is that I use both models in one and the same study and compare the result of my estimates with these two models. As market index, I have used the OMXS30 index and as macroeconomic variables in APT model, I have used inflation, oil price, industry production index and interest. The result of the study is that with the macroeconomic variables, that I have used with APT and CAPM, gives CAPM and APT equivalent results. The conclusion of the study is that APT, with the correct variables, is better model for estimating the stock prices than CAPM.

Bakgrund: Under lång tid har den traditionella tolkningen varit att marknadspremier och högre avkastning på aktiemarknaden är kopplat till risk. Även den mest använda prissättningsmodellen idag, Capital Asset Pricing Model, bygger på detta antagande. I en artikel skriven av Ibbotson och Idzorek (2014) utmanas dock risk som den viktigaste faktorn bakom premier och avkastning. Artikeln innehåller stöd för att relativt hög avkastning har kunnat uppnås på den amerikanska marknaden genom att investera i portföljer med aktier som föregående år varit relativt opopulära. Den höga avkastningen genererades dessutom ofta till relativt låg risk. Intresse finns därmed att analysera effekten av aktiers popularitet även på den svenska marknaden. Syfte: Studiens syfte är att identifiera och analysera effekten av aktiers popularitet på avkastning och risk. Genomförande: I denna kvantitativa studie har aktieomsättningshastighet och aktiestorlek utgjort approximationer för popularitet. Studien har genomförts via utvärdering av avkastning och risk i aktieportföljer uppdelade utifrån variablerna aktieomsättningshastighet och storlek. Vidare har sambandet mellan popularitet och avkastning undersöks via linjär regressionsanalys. Studien har både undersökt effekten av föregående års popularitet, samt effekten av popularitet samma år. Slutsats: Studien visar ingen entydig effekt för aktiers popularitet föregående år på avkastning eller risk, när olika approximationer för popularitetsmått studeras och jämförs. Studien kan konstatera att det inte finns något samband mellan föregående års popularitet och avkastning. Däremot finns det ett positivt samband mellan popularitet och avkastning de år aktiernas popularitet uppmätts, när aktieomsättningshastighet används som approximation. Dessutom kan studien fastslå stöd för aktieomsättningshastighet som ett bra mått på aktiers popularitet. / Background: Over the past few decades it has been generally accepted that market premiums come with an associated level of risk. Even the most widely used pricing model today, CAPM, leans on this assumption. In an article written by Ibbotson and Idzorek (2014) this assumption is challenged as the main driver of market premiums and returns. The article contains evidence that relatively high returns have been earned through buying less  popular stocks on the U.S. stock market. Surprisingly the risk-return dimension exhibited an inverse relationship. This evidence from the U.S. stock market motivates us to investigate to what extent this effect can also be seen on the Swedish stock market. Aim: The aim of this thesis is to identify and analyze the effect of a stock`s popularity on the risk and return. Completion: In this quantitative study, share turnover and market capitalization have been used as approximations for popularity. The effects of stocks popularity on risk and return have been are examined by evaluating the performance of portfolios when categorizing the stocks by share turnover and market capitalization. The statistical relationship between popularity and return is analyzed using regression analysis. This study has both studied the effect of last year's popularity, as well as the effect of the popularity of the same year. Conclusion: When various approximations for the popularity dimension are studied and compared, this study shows no marked effect of stock`s popularity from the previous year on risk and return. The study finds no statistically significant relationship between the previous year ́s popularity and return. However, there is a positive statistically correlation between popularity and return when measured during the same year as when the popularity was measured. In addition, the results establish evidence for the stock turnover as a good measure of popularity.

Bakalauro baigiamajame darbe artlikta akcijų, kuriomis prekiauta Vilniaus vertybinių popierių biržoje (NASDAQ OMX Vilnius) 2000-2012 metais, ir rinkos likvidumo analizė. Teorinėje dalyje sukaupta, susisteminta ir apibendrinta mokslinė literatūra apie vertybinių popierių biržų svarbą, jų įtaką šalies ekonomikos augimui ir rinkos likvidumo svarbą vertybinių popierių biržoms. Tiriamojoje dalyje baziniu akcijų įkainojimo modeliu pasirinktas kapitalinių aktyvių įkainojimo modelis (CAPM). Naudojant NASDAQ OMX Vilnius akcijų prekybos duomenis 2000-2012 metais, vertinama rinkos likvidumo, taikant skirtingus jo matavimus, poveikį akcijų grąžai, išreiškiamai CAPM modeliu. Be to, sudarant skirtingo jautrumo rinkos likvidumo rizikai portfelius apskačiuojama NASDAQ OMX Vilnius likvidumo rizikos premija (kompensacija, kurią gauna investuotojai laikydami nelikvidžias akcijas). / In this bachelor thesis analysis of stocks, which were traded in Vilnius stock market (NASDAQ OMX Vilnius) from 2000 till 2012, and market liquidity risk is carried out. Theoretical part accumulates, systemizes, and summarizes scientific literature about the importance of stock markets, their influence to the country’s economic development and the importance of the market liquidity to the stock markets. In the empirical part capital asset pricing model (CAPM) is chosen as a basic model for stock pricing. While using the trading data from NASDAQ OMX Vilnius from 2000 till 2012 the influence of the market liquidity, which is estimated using various measurements, on the stock returns, which are predicted by CAPM, is analyzed. In addition, through the construction of portfolios with different sensitivity to the market liquidity risk NASDAQ OMX Vilnius liquidity risk premium (compensation to the investors who hold illiquid stocks) is calculated.

Background: Since the early 60’s, the CAPM or Capital Asset Pricing Model, has been an invaluable tool for assessing an asset's expected return, assuming that the asset is added to an already well-diversified portfolio of assets. CAPM theory assume that the unsystematic risk can be diversified and that the systematic, market-specific, risk is determined by the Beta value, from the Greek β. An investor who takes big risks expect higher returns. One of the CAPM’s basic assumptions is that disruption in the market is not taken into account. This assumption may lead to results that do not correspond to reality. Objective: This study examined the relationship between systematic risk, and return on a stable and volatile market. Methodology: The study was performed using a quantitative research with secondary data, in which 30 companies listed on the OMX 30 on the Stockholm stock exchange was studied. The investigation period was from 2003 to 2012 and was divided into three parts. Using the statistics program SPSS and Excel the data required to answer the purpose of the essay was calculated. Results: The analysis of the first time period between 2003 and 2007 showed that there was a statistically significant relationship between beta value and the average return for the period. The second time period between 2008 and 2012, which was characterized by an extremely volatile stock market, showed different results. The result of this period showed no statistical relationship existed when the market was characterized by high volatility. The third and final period between 2003 and 2012, which was a combination of a stable and a volatile market. The results for this period showed no significant association between beta value and average returns. The conclusion of this study is therefore that the CAPM model to assess an asset's return fails when the market is unstable, e.g. due to a financial crisis. To compensate for this error that is built into the model, one should therefore use alternative models, or revised versions of the CAPM, if the aim is to produce data in a realistic way that can be used as basis for investment decisions. / Bakgrund: Sedan början av 60-talet har CAPM, eller Capital Asset Pricing Model, varit ett ovärderligt instrument för att bedöma en tillgångs förväntade avkastning, där man antar att tillgången läggs till i en redan väldiversifierad portfölj av tillgångar. CAPM teorin antar vidare att den osystematiska risken diversifieras bort samt att den systematiska, marknadsspecifika, risken bestäms med hjälp av Beta-värdet, från grekiskans β. En investerare som tar stora risker förväntar sig högre avkastning. Ett av CAPM:s grundantaganden är att störningar på marknaden inte tas hänsyn till. Detta antagande kan leda till resultat som inte stämmer överens med verkligheten.   Syfte: I denna studie undersöktes sambandet mellan systematisk risk, samt avkastning på en stabil respektive volatil marknad. Metod: Undersökningen genomfördes med en kvantitativ forskningsmetodik med sekundära data där 30 bolag noterade på OMX30 på stockholmsbörsen studerades. Undersökningsperioden var mellan 2003 till 2012 och delades upp till tre delar Med hjälp av statistikprogrammet SPSS samt Excel beräknades nödvändiga data för att svara på uppsatsens syfte. Resultat: Analysen av den första tidsperioden mellan 2003-2007 visade att det förelåg ett statistiskt signifikant samband mellan betavärdet och den genomsnittliga avkastningen för perioden. Den andra tidsperioden mellan 2008-2012, som kännetecknades av en mycket volatil aktiemarknad, visade annorlunda resultat. Resultatet av denna tidsperiod visade att inget statistiskt samband förelåg när marknaden kännetecknades av en hög volatilitet. Den tredje och sista och perioden mellan 2003-2012, som alltså var en kombination av en stabil och en volatil marknad. Resultatet för denna tidsperiod visade inget signifikant samband mellan betavärdet och den genomsnittliga avkastningen. Slutsatsen av denna studie blir därmed att CAPM som metod för att bedöma en tillgångs avkastning fallerar när marknaden är ostabil, t.ex. beroende på en finanskris. För att kompensera för detta fel som är inbyggt i modellen bör därför alternativa modeller, eller justerade versioner av CAPM, användas om syftet är att ta fram data som på ett verklighetstroget sätt kan vara underlag för investeringsbedömningar.

<p>The aim of this master thesis was to examine whether the noticed effect of Black Monday October 1987 on stock market volatility has also influenced the predictive power of the single factor CAPM and the Fama French three factor CAPM, in order to conclude whether the models are less effective after the stock market crash. I have used an OLS regression analysis and a Monte Carlo Simulation technique. I have applied these techniques on 12 industry portfolios with US data to draw a conclusion whether the predictability of the single and three factor model has changed after October 1987. My research confirms that the single factor CAPM performs better before October 1987 and also found evidences that support the same hypothesis of Black Monday effect on the predictive power of the Fama French three factor model.</p>

No description available.

[pt] Este trabalho objetivou realizar um estudo de caso para analisar a performance da ação da Lojas Americanas (LAME 4), negociada na BMeFBOVESPA, utilizando quatro modelos de previsão de retornos esperados. Os modelos escolhidos foram: CAPM (Capital Asset Pricing Model) de Sharpe (1964), Lintner (1965) e Mossin (1966), modelo de 3 fatores de Fama e French (1992), modelo de 4 fatores de Fama, French e Carhart (1997) e o modelo APT (Arbitrage Pricing Theory) de Ross (1996). A metodologia foi estruturada em duas partes: utilização de regressões múltiplas para verificar a significância dos fatores em cada modelo e comparação dos resultados para indicar aquele que se mostrou mais adequado para explicar o comportamento do ativo. Por fim, o modelo de três fatores de Fama, French revelou-se mais apropriado. / [en] The objective of this study was to conduct a case study to analyze the performance of the Lojas Americanas stock (LAME 4), traded on the BMeFBOVESPA, using four expected returns prediction models. The chosen models were CAPM (Capital Asset Pricing Model) of Sharpe (1964), Lintner (1965) and Mossin (1966), model of 3 factors of Fama and French (1992), model of 4 factors of Fama, French and Carhart (1997) and the APT (Arbitrage Pricing Theory) model of Ross (1996). The methodology was structured in two parts: the use of multiple regressions to verify the significance of the factors in each model and the comparison of the results to indicate the one that was more adequate to explain the behavior of the asset. Finally, the three-factor model of Fama, French was found to be more appropriate.

[pt] O Capital Asset Pricing Model (CAPM) é o modelo mais difundido e utilizado para determinação do custo de capital de empresas e estimação do retorno esperado de ações. Neste modelo, o parâmetro fundamental é o beta, que define a intensidade em que determinado ativo é exposto aos retornos do mercado. O objetivo deste trabalho é avaliar a estabilidade dos betas de uma vasta quantidade de ações no mercado brasileiro em três períodos de alta volatilidade: a crise asiática de 1997, a turbulência no mercado financeiro pré-eleições 2002 e a crise financeira de 2008, nas quais foram analisadas 55, 79 e 172 empresas respectivamente. Cada ciclo de crise foi dividido em três períodos de 52 semanas e os respectivos betas foram comparados utilizando testes de Chow e com regressões com variáveis dummy. Os resultados de ambos os testes foram similares para as crises analisadas, indicando que entre 11 porcento e 27 porcento das empresas apresentaram variação de seus betas, com 5 porcento de significância, quando comparados os períodos pré-crise e durante a crise. Não obstante, ao confrontar períodos pré-crise e pós-crise, a maior parte das empresas que apresentaram variação anteriormente não rejeitaram a hipótese de estabilidade. Estes resultados indicam que, conforme esperado, os betas tendem a ser estáveis no longo prazo. / [en] The Capital Asset Pricing Model (CAPM) is the most widespread model, used to determine the cost of capital of firms and estimate expected stock returns. In this model, the most important parameter is the beta, which defines the magnitude of exposition to market returns, for a particular asset. The objective of this essay is to evaluate beta stability of a vast amount of shares in the Brazilian stock market in three highly volatile periods: the Asian crisis in 1997, the financial market turmoil before 2002 presidential elections and the 2008 financial crisis. The sample included 55, 79 and 172 companies, respectively. Each crisis cycle was then divided into three periods of 52 weeks and then the stability of their betas was measured using regressions with dummy variables and Chow tests. We have reached similar results for the crises analyzed, indicating that between 11 percent and 27 percent of the companies changed their betas when comparing pre-crisis and during crisis periods, with a 95 percent confidence level. Nevertheless, by comparing pre-crisis and post-crisis periods, most of the companies that exhibited change in their betas when entering the crisis, did not reject the stability hypothesis. These results indicate that, as expected, betas tend to be stable in the long term.

Escolheu-se o método GMM a fim de testar os modelos CAPM não-condicionais (Sharpe-Litner e zero-beta) no mercado de capitais brasileiro, pois as séries dos log-retornos diários de ações analisadas não se mostraram normais e IID. Este trabalho é pioneiro em testar a validade do modelo CAPM zero-beta via GMM no mercado brasileiro. Constatamos que o modelo CAPM de SL, tanto em termos da SELIC como do CDI, não pode ser rejeitado ao nível de 5% para o período de 2/1/00 até 31/12/04. Já para os períodos de 2/1/95 até 31/12/99 e de 2/1/95 até 31/12/04, tal modelo foi rejeitado ao nível de 5%. Dessa forma, para o modelo CAPM de SL, tanto em termos da SELIC como do CDI, o índice BOVESPA se comportou como um portfólio eficiente somente no período de 2/1/00 até 31/12/04. Já para o modelo CAPM zero-beta, verifica-se a sua não rejeição ao nível de 5% nos três períodos analisados acima. / The GMM method have been chosen in order to test non-conditional CAPM (Sharpe-Lintner and zero-beta) model in Brazilian security market, because the daily log-returns series of the analyzed shares did not showed itselves as normal and IID. This dissertation will be pioneer in testing the validity of the CAPM zero-beta model by GMM. We have realized that the SL CAPM model, either in terms of SELIC rate as of CDI rate (risk-free assets), can not be rejected at 5% level for the period from 2/1/00 until 31/12/04. For the periods from 2/1/95 until 31/12/99 and from 2/1/95 until 31/12/04, the given model was rejected at the 5% level. This way, for the SL CAPM model, either in terms of SELIC rate as of CDI rate, the BOVESPA index has behaved as an efficient portfolio only on the period from 2/1/00 until 31/12/04. For the zero-beta CAPM model, it can be verified that we cannot reject it at the 5% level in none of the three periods analyzed above.