1. ONANA, Bissaya Axel Didier
An Empirical Testing of Capital Asset Pricing Model on the Nigerian Stock Exchange By
ONANA, Bissaya Axel Didier
March, 2017

2. Capital Asset Pricing Model what is all about?
Assumptions
The Market is efficient
Investors are risk-averse
Homogeneous expectations
Single time period
Risk-free rate

3. Key Features of the Model
The expected return of an asset strictly depends on the systematic risk (market risk)
The expected return and the risk are linearly related
No other type of risk can influence the return of asset

4. Problem of the Study Despite the worldwide reputation of CAPM, the empirical literature shows mixed evidence about the ability of the model to explain the movement of the asset’s return. Therefore, it’s crucial to make an attempt to see if the market risk can explain the fluctuation of the stock returns in the Nigerian stock market

5. Aim of the Research
To test the validity of the Capital Asset Pricing Model as far as the Nigeria Stock Exchange is concerned

6. Research Methodology Ex post hypothetico-deductive design
Sample size is 50 firms
Time frame
Hamada Equation to estimate Beta LB=UB[1+(1-T)(DR)]
Ordinary Least Square Regression analysis
Autocorrelation Conditional Heteroskedasticity

7. Findings
There is no significant relationship between the realized return and market risk
The expected return and market risk are linearly related
The non-systematic risk affect the expected return

8. Conclusion
The Capital Asset Pricing Model is not valid in the Nigeria Stock Market.
Even if the CAPM does not hold in the Nigeria Stock Exchange, the study does not provide evidence in support of any alternative model

9. Recommendations
Investors and portfolio managers ought to enhance the strategies they use in streamlining their portfolios as the market altogether remunerates market risk.
Firms and ventures must be proactive in differentiating non-efficient risk and innovatively reacting to market risk.
Viable financial approaches are required to keep on enhancing the sovereign risk status of the nation and in addition that of the organizations and businesses.