Return Viability in Caricom Equity Markets
نویسنده
چکیده
This paper examines the validity of the Sharpe-Linter-Black Capital Asset Pricing Model (CAPM) to stocks traded on the Barbados, Jamaica and Trinidad & Tobago Stock Exchanges. Tests of the CAPM are based on portfolio betas made up of stocks emanating from all three exchanges and are carried out on the alternative multifactor specification proposed by Fama and French (1992), extended to include the possible pricing of idiosyncratic volatility proposed by Malkiel and Xu (1997, 2006). Tests are also carried out to account explicitly for negative excess market returns within the framework proposed by Pettengill et al. (1995). The results support the conclusion that betas, while useful, are not sufficient on their own to account for the variation in equity returns in the CARICOM markets.
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