CAPM: an application to the Portuguese companies in the retail sector

• Autor(a) principal: Batista, Diana Patrícia Correia
• Data de Publicação: 2019
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/19289
• topic: CAPM; Jerónimo Martins (JMT); Sonae (SON); PSI-20 (PSI20); Returns; Market risk; Risk-free rate; Risco sistemático

The objective of this study is to estimate the CAPM for the two Portuguese retail companies listed in the PSI-20 (JMT and SON) and assess how the two of them evolve regarding the Portuguese market index. This study covered sixteen years (pre and post-subprime crisis) and, based on estimation results, we established a comparison between the relation of each company with the PSI-20. We also analysed the differences before and after the 2008 financial crisis. For this purpose, the estimation of α and β coefficients was done by using the OLS method, and the adequacy of the model was checked by verifying the statistical significance of the regression coefficients and the fulfilment of the OLS assumptions. Finally, the main conclusion is that the two companies tend to behave differently concerning the Portuguese market index. All the beta estimates were statistically significant, meaning that changes in the PSI-20 returns will influence the changes on each company’s returns, which is in line with the CAPM. However, except for two periods for JMT, the alpha estimates were statistically significant, meaning that there were additional factors other than the market risk premium that explained the expected value of excess returns. We could also note that the expected returns for JMT went from a negative value (pre-crisis) to a positive value (post-crisis), while for SON there was a decline in the alpha value.