CAPM anomalies and the efficiency of stock markets in transition: evidence from Bulgaria
Authors
Miroslav I. Mateev
Keywords:
Average return, Beta, Cross-sectional regression, Emerging markets, Market in transition, G12
Abstract
This paper investigates empirically the relation between average return and
beta in the Bulgarian stock market. First, using a sample of common stocks
traded on the BSE-Sofia, the study examines the effects of infrequent trading
on beta estimates, measured from daily, weekly and monthly return intervals.
It aims to find out whether the differences in the stability of systematic risk
estimates can be explained by infrequent trading. Second, the study investigates
the role of beta and other commonly recognized variables (size, book-to-market
equity, asset-to-market equity, asset-to-book equity and price) in explaining
cross-sectional variations in average returns over the period from January
1998 to December 2002. Evidence indicates that beta, size, market and book
leverages are priced, whereas significant book-to-market equity and price
effects are not observed on the BSE-Sofia. These findings are in contrast to
the evidence from other markets that the relation between average return
and beta is flat, and size and book-to-market equity effects are significant.