n African Finance Journal - An examination of the time variation in systematic risk on the Stock Exchange of Mauritius
|Article Title||An examination of the time variation in systematic risk on the Stock Exchange of Mauritius|
|© Publisher:||AfricaGrowth Institute|
|Journal||African Finance Journal|
|Author||Sunil K. Bundoo|
|Publication Date||Jan 2006|
|Pages||51 - 65|
|Keyword(s)||G11, G12, Stock Exchange of Mauritius and Time-varying beta|
This study estimates the systematic for the listed companies on the Stock Exchange of Mauritius using the capital asset pricing model and the market model. We then correct for thin trading. Finally, the Schwert and Seguin (1990) model is used to estimate the time variation in beta. The results indicate that the betas corrected for thin trading are quite different from the traditional beta estimates. It is therefore crucial to take thin trading into account when estimating systematic risk for markets characterized by thin trading. Moreover, when the time-variation in beta is taken into account, the empirical regularity that the spread between the systematic risk of small and large firms is higher as market volatility increases is confirmed by the data.
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