A Model for Pricing Equity in an Environment Characterised by Information Asymmetry – A Case of an Emerging Market
Year: 2009
Type: preprint
Abstract: Several attempts have been made to adapt or improve the capital asset pricing model (CAPM) developed by Sharpe (1964) and one of such is the 'conditional' CAPM developed by Javed (2000). The 'conditional' CAPM was developed to accommodate time variation in information available to investors but the model is unsuitable for an informational inefficient market. The Javed (2000) model was tested by Javid and Ahmad (2008) and we have modified the model to accommodate features of an informational inefficient market as prevalent in emerging markets like Nigeria.The proxies of information asymmetry (market microstructures, book to market value, and analyst forecast measures) were introduced into modified model to cater for equity pricing in the primary market where forces of demand and supply are not required in price determination. The microeconomic variables (dividend per share, earnings per share, and trading volumes) and macroeconomic variables (gross domestic product, interest, oil, inflation, consumer index, and foreigh exchange rate) were the independent variables in the modified model for equity pricing in the secondary market.
Source: SSRN Electronic Journal
Institution: Olabisi Onabanjo University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W345211708