On the stability of the CAPM before and after the financial crisis: Panel evidence from the Johannesburg Securities Exchange

Abstract

This study examines the stability of the CAPM before and after the recent global financial crisis in the Johannesburg Securities Exchange (JSE). Firms’ betas are derived from OLS and M-estimation regressions. Fixed and random effects are employed to estimate the linear and the nonlinear version of the CAPM. Evidence against a stable beta emerges after the crisis but not before. The latter holds for the non-linear paradigm as well.

Keywords: Panel data; CAPM; South Africa; Global financial crisis.