Testing The Validity of Zero-Beta Capm in Vietnamese Stock Market
Year: 2024
Type: article
Abstract: Objectives: This study examines the validity of the Zero-Beta Capital Asset Pricing Model (CAPM) in the context of Vietnam's stock market, exploring its potential for sustainable, SDG-aligned investment without relying on a traditional risk-free interest rate. Theoretical Framework: The research builds on Black's (1972) Zero-Beta CAPM framework, addressing limitations of the riskless rate assumption in emerging markets where stable growth is essential. Method: Using a dataset of daily returns from 365 stocks listed on the Ho Chi Minh City Stock Exchange (2008-2024), the study applies Ordinary Least Squares (OLS) regression to calculate alpha and beta values, testing for a sensitive zero-beta return that correlates with sustainable investment goals. Results and Discussion: The analysis reveals a daily sensitive zero-beta return of 0.0149%, surpassing the Vietnamese 15-year government bond rate, thus supporting Zero-Beta CAPM's validity without a risk-free rate. This suggests that zero-beta CAPM can offer a viable approach for sustainable investment in Vietnam, enhancing returns through portfolio ownership. Research Implications: The study demonstrates the feasibility of applying CAPM to emerging markets with sustainability considerations, positioning the sensitive zero-beta return as a proxy for sustainable market portfolio ownership. Originality/Value: This research expands CAPM’s theoretical scope by adapting it to markets with unique sustainability demands, providing insights into leveraging market portfolio ownership for improved investment performance in Vietnam’s stock market.
Authors: Thai Hong Thuy Khanh, Nguyen Cao Anh
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4404864889