The capital asset pricing model (CAPM) has for half a century been considered a pillar of modern finance in describing the relationship that is deemed to exist between the risk of owning an asset and the expected future returns from that asset. The model has however been subject to criticisms and attacks in the literature and some doubt remains about the validity and successful application of the model. This research builds on previous empirical testing of the CAPM with a specific focus on the cost of equity of companies listed on the Johannesburg Stock Exchange.
The approach of this research was to use market values, as indicated by the share price of a listed company and discounted free cash-flow valuations to determine both an estimated and implied cost of equity. The aim was to test the validity of the CAPM empirically and potentially find an accurate, implied cost of equity for the South African equity market, by comparing the different rates and looking for statistical correlation between them. While no correlation could be found, this study did provide evidence that the cost of equity and the market risk premium in South Africa is potentially higher than previously thought. / Dissertation (MBA)--University of Pretoria, 2013. / ccgibs2014 / Gordon Institute of Business Science (GIBS) / MBA / Unrestricted
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:up/oai:repository.up.ac.za:2263/40768 |
| Date | January 2013 |
| Creators | Kempff, Paul |
| Contributors | Ward, Mike, ichelp@gibs.co.za |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Mini Dissertation |
| Rights | © 2014 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. |
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