EMPIRICAL TEST OF CAPITAL ASSET PRICING MODEL ON SECURITIES RETURN OF LISTED FIRMS IN NIGERIA

Abstract

This paper applied the capital-asset pricing model (CAPM) to determine stock returns of listed firms in the Nigeria Stock Exchange (NSE). For the purpose of investigation, annual data on stock price of twenty six (26) listed firms, Treasury bill a measure of risk- free rate and all share indexes a proxy for market returns were extracted while beta value was computed for the period 2010 to 2016 upon which the model was analyzed. Finding indicates that the CAPM generated a very high return among the firms given the influence of the beta coefficient. The study concludes that higher market risk measured by beta, is associated with higher expected returns. It is therefore recommended that managers of firms in other sectors in Nigeria need to constantly use this model to price security return with a view to guiding investors at investing in securities based on risk preference behavior and also to enable them maximize wealth from a basket of portfolio. .