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Measuring the Systematic Risk of Stocks Using the Capital Asset Pricing Model
Journal of Investment and Management
Volume 6, Issue 1, February 2017, Pages: 13-21
Received: Sep. 13, 2016; Accepted: Sep. 30, 2016; Published: Dec. 14, 2016
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Authors
Abonongo John, Department of Mathematics, College of Science, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Ackora-Prah J., Department of Mathematics, College of Science, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Kwasi Boateng, Department of Mathematics, College of Science, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
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Abstract
Among the paramount information in the stock market is the awareness of the systematic risk of stocks which plays essential role in investment choices. This paper measured the systematic risk of seven stocks on the Ghana Stock Exchange (GSE) using monthly closing prices and the 91 day T-bill from the period 2011 to 2015. The CAPM was employed in measuring the systematic risk of the stocks. The results revealed that, CAL, FML and TLW were defensive stocks since each had a market beta less than one (1). PBC, CLYD, EGL and UNIL had the same systematic risk as the market since each recorded a market beta of one (1). All the seven stocks each had a positive market beta implying that they move in a similar manner as the market. The compensation for investing in each of the stock was approximately at 3%. The diversifiable risk associated with each of the stock was very low since few of the returns were scattered along the regression line.
Keywords
Systematic Risk, CAPM, Risk Premium, Market Beta, Expected Return
To cite this article
Abonongo John, Ackora-Prah J., Kwasi Boateng, Measuring the Systematic Risk of Stocks Using the Capital Asset Pricing Model, Journal of Investment and Management. Vol. 6, No. 1, 2017, pp. 13-21. doi: 10.11648/j.jim.20170601.13
Copyright
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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