CAPITAL INVESTMENTS IN EMERGING STOCK MARKETS – Evaluation of Size and Book-to-market Factors in Kazakhstan Stock Market using the CAPM Regression

Abstract

The main objective of this study is to fill the gaps in the scope of Capital Asset Pricing Model researches for emerging markets by choosing stock market of Kazakhstan. Moreover, the thesis is intended to evaluate the effectiveness of size and book-to-market factors in Kazakhstan stock exchange.

In order to achieve the objectives of this paper, the CAPM regressions of selected 6 stocks are performed. Afterwards, the results of samples of each factor are compared. These are followed by the discussion of findings and the conclusion about efficiency of the factors and the CAPM in Kazakhstan stock market.

This study concludes that small companies traded in Kazakhstan stock exchange do not outperform big companies, and therefore, the study rejects the size factor of Fama and French (1993) for the chosen market. Additionally, the research highlights that value stocks do not outperform growth stocks. As a result, the effectiveness of book-to-market factor of Fama and French (1993) is disproved in the market of interest. Moreover, the study presents that the statistical significance of beta coefficients is very high, and therefore, the null hypothesis is rejected. Because of highly statistically significant beta variable, the CAPM model is found to be effective in Kazakhstan stock market for the observed horizon.