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Contaduría y administración
Print version ISSN 0186-1042
Abstract
SANSORES GUERRERO, Édgar. The capital assets valuation model applied to emerging financial markets: The mexican case 1997-2006. Contad. Adm [online]. 2008, n.226, pp.93-111. ISSN 0186-1042.
The purpose of this paper was to determine the validity of the basic assumptions of the Capital Asset Pricing Model (CAPM), from a statistical and financial perspective. In addition the application to the Mexican Stock Market as a model to select investment portfolios was evaluated. The following assumptions were tested: the mean-variance criteria as a standardization of the decision making framework, market efficiency, and the assessment investors follow according to investments risk and return. It is concluded that, even though CAPM has proved to be efficient as a forecasting tool in strong economies, it still has to prove its fitness for emerging markets. According to this investigation, in Mexico other encountered risk factors are inflation, insecurity and political environment, among others. Given the properties of emerging markets, an analysis using the CAPM model turns out to be unfit as it distorts the stock market operations.
Keywords : stock market; Capital Asset Pricing Model (CAPM); risk; emerging markets; return.