The Validity of the Capital Asset Pricing Model in Predicting Stock Returns in Ghana's Stock Exchange Market

Authors

  • Anyoka Atiah Douglas Valley View University, School of Graduate Studies, Ghana

Keywords:

stock returns, Ghana Stock Exchange, risk-free rate, beta of the security, market risk premium, emerging markets

Abstract

This study investigates the predictive capacity of the Capital Asset Pricing Model (CAPM) components—Risk-Free Rate, Beta of the Security, and Market risk Premium—on stock returns in the Ghana Stock Exchange. Employing a quantitative approach, the research collected responses from 154 participants, including accounting professionals and investors. Structural equation modeling techniques were utilized for data analysis, ensuring the reliability and validity of the constructs. The path analysis validated three hypotheses, revealing significant positive effects of the examined CAPM components on the Expected Rate of Return/Sock Return. The findings contribute empirical insights to financial asset pricing literature, confirming the applicability of CAPM in the Ghanaian context and providing actionable guidance for investors. Implications extend to academic discourse, influencing financial analysts, policymakers, and market practitioners. Recommendations for further study involve exploring variations in CAPM application across diverse emerging economies and investigating the stability of relationships under evolving market conditions.

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Published

2024-03-31

How to Cite

Douglas, A. A. . (2024). The Validity of the Capital Asset Pricing Model in Predicting Stock Returns in Ghana’s Stock Exchange Market. ADRRI Journal of Finance, Economics and Sustainable Development, 2(1 (1), January 2024-March,2024), 1-13. Retrieved from https://journals.adrri.org/index.php/adrrijfesd/article/view/1100