Testing the Validity of the Capital Asset Pricing Model (Capm) in the Vietnamese and Finnish Market: an investigation of the validity of CAPM during the Covid-19 pandemic and the energy crisis periods
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School of Business |
Bachelor's thesis
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Date
2023
Department
Major/Subject
Mcode
Degree programme
(Mikkeli) Bachelor’s Program in International Business
Language
en
Pages
44 + 10
Series
Abstract
Objectives In an effort to find a solution to the issues mentioned, the following research questions will be addressed in this thesis: 1. Is there a positive linear relationship between systematic risk and the actual rate of return? 2. Are the daily/weekly/monthly returns of stocks with high and low-beta significantly different? 3. Are high beta stocks' returns higher on a daily, weekly, and monthly basis to balance out the increase in the risk? Summary With an aim to fulfill the study's goals, daily/weekly/monthly historical data of 25 largest weight stocks listed on Ho Chi Minh Stock Exchange (HOSE) and Helsinki Stock Exchange (HSE) were retrieved to calculate the estimated returns and the beta values, while the market benchmark indexes are VNI30 and OMXH25. According to the calculated beta values, the selected stocks will be separated into two different groups: high and low-beta stocks. These two groups will be used as variables for two-tailed t-tests, then demonstrate the significance of the variance in return between the two stock groups. Conclusions The t-test analysis is unable to reject the six null hypotheses because there is not enough evidence to show the significance of the differences between high and low beta values throughout the normal and Covid-19 pandemic periods. About the energy crisis period, even though the t-test shows that there is enough evidence about the significant difference between high and low beta values, its negative t-stat values prevent the validation of CAPM during this period. In general, it can be concluded that CAPM is invalid in the two selected indexes during the Covid-19 pandemic and the energy crisis periods.Description
Thesis advisor
Stepanov, RomanKeywords
CAPM, systematic risk, rate of return, beta, COVID-19, energy crisis, VNI30, OMXH25