Multivariate tests of the Capital Asset Pricing Model: The South African evidence

A recent development in financial research has been the emergence of a multivariate approach for testing asset pricing models. In this article a multivariate test for the validity of the Capital Asset Pricing Model (CAPM) on the Johannesburg Stock Exchange (JSE) is proposed. A technique for testing additional factors for asset pricing is also considered. The results show that the validity of the CAPM cannot be rejected on to the JSE. By constrast to results found on the New York Stock Exchange, none of the additional factors, namely, firm size, dividend yield and liquidity were found to influence asset pricing on the JSE.